A Large National Bank Charges Local Companies for Using Its $$E ( y ) = \beta _ { 0 } + \beta _ { 1 } x .$$

question 89

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

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