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.

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Definitions:

Inventory

The raw materials, work-in-progress products, and completely finished goods that are considered to be the portion of a business's assets that is ready or will be ready for sale.

Asynchronization

The lack of synchronization; occurring not simultaneously or at different times or rates.

Financial Planning

Financial planning is the process of creating strategies for managing financial affairs and meeting life goals through the proper management of finances.

Cash Inflows

Money received by a company from its operational activities, investments, or financing.