TABLE 12-1 A Large National Bank Charges Local Companies for Using Their

question 22

Multiple Choice

TABLE 12-1
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:
Y1 - β0 + β1X1 + εi
The results of the simple linear regression are provided below.
Y = -2,700 + 20 X, SYX = 65, two-tail p-value = 0.034 (for testing β1)
-Referring to Table 12-1, 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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