TABLE 13-1 A Large National Bank Charges Local Companies for Using Their

question 134

Multiple Choice

TABLE 13-1
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 charges to a company is the company's sales revenue (X) measured in millions of dollars. Data for 21 companies who use the bank's services were used to fit the model:
Yᵢ = β₀ + β₁Xi + Eᵢ
The results of the simple linear regression are provided below.

-Referring to Table 13-1, interpret the estimate of σ, the standard deviation of the random error term (standard error of the estimate) in the model.

• A) About 95% of the observed service charges fall within $65 of the least squares line.
• B) About 95% of the observed service charges equal their corresponding predicted values.
• C) About 95% of the observed service charges fall within $130 of the least squares line.
• D) For every $1 million increase in sales revenue, we expect a service charge to increase $65.

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Definitions:

State Legislatures

The legislative bodies within each of the states in the United States, responsible for creating state laws and policies.

Corporate Veil

A legal concept that separates the actions and liabilities of a corporation from those of its shareholders, protecting them from personal liability.

Creditors

Individuals or entities to whom money is owed by another individual or entity known as the debtor.

Not-for-Profit Corporations

Organizations that operate for purposes other than making a profit, often focusing on cultural, educational, and charitable activities.