How Should the Loan Officer Interpret the Coefficient on X₂

question 151

Multiple Choice

How should the loan officer interpret the coefficient on x₂?

• A)For an additional 1.3 percent increase in the interest rate,we would expect the total dollar value of residential loans to decrease by $1.0 million,assuming that all the other independent variables in the model are held constant.
• B)For an additional percent increase in the interest rate,we would expect the total dollar value of residential loans to decrease by $1.3 million on average,assuming that all the other independent variables in the model are held constant.
• C)For an additional million dollars in loans,we would expect the interest rate to decrease by 1.3 percent,assuming that all the other independent variables in the model are held constant.
• D)For an additional $1.3 million in loans,we would expect the interest rate to decrease by 1.0 percent on average,assuming that all the other independent variables in the model are held constant.

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Definitions:

Long-Term Liabilities

Debts that will be repaid over a number of years, such as long-term loans and bond issues.

Face Value

The nominal or dollar value stated on a financial instrument, such as a bond or stock certificate, representing its worth if redeemed at maturity.