A Large National Bank Charges Local Companies for Using Their $( y )$

question 41

Multiple Choice

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 $\$$ million. Data for 21 companies who use the bank's services were used to fit the model
$$E ( y ) = \beta _ { 0 } + \beta _ { 1 } x$$
Suppose a $95 \%$ confidence interval for $\beta 1$ is $( 15,25 )$ . Interpret the interval.

• A) We are \(95 \%\) confident that service charge \(( y )\) will decrease between \(\$ 15\) and \(\$ 25\) for every \(\$ 1\) million increase in sales revenue \(( x )\).
• B) We are \(95 \%\) confident that sales revenue \(( x )\) will increase between \(\$ 15\) and \(\$ 25\) million for every \(\$ 1\) increase in service charge \(( y )\).
• C) We are \(95 \%\) confident that service charge \(( y )\) will increase between \(\$ 15\) and \(\$ 25\) for every \(\$ 1\) million increase in sales revenue \(( x )\).
• D) We are \(95 \%\) confident that the mean service charge will fall between \(\$ 15\) and \(\$ 25\) per month.

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Definitions:

LIFO Method

Last In, First Out method; an inventory valuation technique where the most recently produced items are recorded as sold first.

Prospective Treatment

An approach in accounting where changes are applied to transactions and events from a specific date forward.

Reporting Entity

An entity, such as a company or organization, that must prepare financial statements to provide information to users.

MACRS Depreciation

The Modified Accelerated Cost Recovery System is a method of depreciation for tax purposes in the United States, allowing for faster depreciation of assets in the early years.