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

question 44

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, a 95% confidence interval for β₁ is (15, 30) . Interpret the interval.

• A) We are 95% confident that the mean service charge will fall between $15 and $30 per month.
• B) We are 95% confident that the sales revenue (X) will increase between $15 and $30 million for every $1 increase in service charge (Y).
• C) We are 95% confident that average service charge (Y) will increase between $15 and $30 for every $1 million increase in sales revenue (X).
• D) At the α = 0.05 level, there is no evidence of a linear relationship between service charge (Y) and sales revenue (X).

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Definitions:

Book Value

The net value of a company's assets expressed on its balance sheet, calculated as the total assets minus intangible assets (patents, goodwill) and liabilities.

Profit Margin

A financial metric indicating the percentage of revenue that exceeds the cost of goods sold, showing the profitability of a company.

Net Income

The total earnings of a company after subtracting all expenses, including taxes, from its total revenues.

Average Assets

A financial measure used to calculate the average total assets a company has had at its disposal over a certain period, often used in evaluating asset efficiency and ROI calculations.