SCENARIO 17-11 A Logistic Regression Model Was Estimated in Order to Predict

question 59

Multiple Choice

SCENARIO 17-11
A logistic regression model was estimated in order to predict the probability that a randomly chosen
university or college would be a private university using information on mean total Scholastic
Aptitude Test score (SAT) at the university or college, the room and board expense measured in
thousands of dollars (Room/Brd) , and whether the TOEFL criterion is at least 550 (Toefl550 = 1 if
yes, 0 otherwise.) The dependent variable, Y, is school type (Type = 1 if private and 0 otherwise) .
The Minitab output is given below:
-Referring to Scenario 17-11, which of the following is the correct interpretation for the Tofel500 slope coefficient?

• A) Holding constant the effect of the other variables, the estimated mean value of school type is 0.39 lower when the school has a TOEFL criterion that is at least 550.
• B) Holding constant the effect of the other variables, the estimated school type decreases by 0.39 when the school has a TOEFL criterion that is at least 550.
• C) Holding constant the effect of the other variables, the estimated natural logarithm of the odds ratio of the school being a private school is 0.39 lower for a school that has a TOEFL criterion that is at least 550 than one that does not.
• D) Holding constant the effect of the other variables, the estimated probability of the school being a private school is 0.39 lower for a school that has a TOEFL criterion that is at least 550 than one that does not.

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Definitions:

Initial Outlay

The upfront expenditure necessary to initiate a project or investment.

Incremental Cash Flows

The additional cash flow generated by a company as a result of a decision to undertake a new project or investment.

Capital Budgeting

The process by which a business evaluates and selects long-term investments that are worth more than the cash they cost.

Sunk Costs

Costs that have been incurred and cannot be recovered, not affecting future business decisions.