A Large National Bank Charges Local Companies for Using Its $( x )$

question 32

Multiple Choice

A large national bank charges local companies for using its 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 the 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
$$E ( y ) = \beta _ { 0 } + \beta _ { 1 } x .$$
The results of the simple linear regression are provided below.
$$\hat { y } = 2,700 + 20 x$$
Interpret the estimate of $\beta _ { 0 }$ , the $y$ -intercept of the line.

• A) All companies will be charged at least \(\$ 2,700\) by the bank.
• B) About \(95 \%\) of the observed service charges fall within \(\$ 2,700\) of the least squares line.
• C) For every \(\$ 1\) million increase in sales revenue, we expect a service charge to increase \(\$ 2,700\).
• D) There is no practical interpretation since a sales revenue of \(\$ 0\) is a nonsensical value.