TABLE 13-1 A Large National Bank Charges Local Companies for Using Their

question 65

Multiple Choice

TABLE 13-1
A large national bank charges local companies for using their services. A bank official reported the results of a regression analysis designed to predict the bank's charges (Y) -- measured in dollars per month -- for services rendered to local companies. One independent variable used to predict service charge to a company is the company's sales revenue (X) -- measured in millions of dollars. Data for 21 companies who use the bank's services were used to fit the model:
E(Y) = β₀ + β₁X
The results of the simple linear regression are provided below.
Y = -2,700 + 20X, S_YX = 65, two-tail p value of 0.034 (for testing β₁)
-Referring to Table 13-1, interpret the p-value for testing whether β₁ exceeds 0.

• A) There is sufficient evidence (at the α = 0.05) to conclude that sales revenue (X) is a useful linear predictor of service charge (Y).
• B) There is insufficient evidence (at the α = 0.10) to conclude that sales revenue (X) is a useful linear predictor of service charge (Y).
• C) Sales revenue (X) is a poor predictor of service charge (Y).
• D) For every $1 million increase in sales revenue, we expect a service charge to increase $0.034.

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Definitions:

Bank Notes

Paper money issued by a central bank, constituting a common form of legal tender in many economies around the world.

Operating Activities

Activities that constitute the primary or main activities of a company, including production, sales, and delivery of goods and services.

Changes in Equity

Adjustments in a company's equity section of the balance sheet, including changes due to profits, losses, dividends, and issuance or repurchase of shares.