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

question 26

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 p-value for testing whether β₁ exceeds 0.

• A) There is sufficient evidence (at the α = 0.05) to conclude that sales revenue (
• X) is a useful linear predictor of service charge (
• Y).
• B) There is insufficient evidence (at the α = 0.10) to conclude that sales revenue (
• X) is a useful linear predictor of service charge (
• Y).
• C) Sales revenue (
• X) is a poor predictor of service charge (
• Y).
• D) For every $1 million increase in sales revenue, you expect a service charge to increase $0.034.

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Definitions:

Critical Value

A point on the scale of the test statistic beyond which we reject the null hypothesis; it is the threshold at which the level of significance is set.

Regression Analysis

A statistical method for estimating the relationships among variables, often used to predict the value of one variable based on others.

Independent Variables

Variables in an experimental setup that are changed or controlled to test their effects on dependent variables.

Observations

The individual data points or recorded measures of variables collected during a research study or experiment.