A Researcher Wants to Examine How the Remaining Balance on $100,000

question 120

Multiple Choice

A researcher wants to examine how the remaining balance on $100,000 loans taken 10 to 20 years ago depends on whether the loan was a prime or subprime loan. He collected a sample of 25 prime loans and 25 subprime loans and recorded the data in the following variables: Balance = the remaining amount of loan to be paid off (in $) ,
Time = the time elapsed from taking the loan,
Prime = a dummy variable assuming 1 for prime loans, and 0 for subprime loans.
The regression results obtained for the models:
Model A: Balance = β₀ + β₁Prime + ε
Model B: Balance = β₀ + β₁Time + β₂Prime + β₃Time × Prime + ε
Model C: Balance = β₀ + β₁Prime + β₂Time × Prime + ε,
Are summarized in the following table. Note: The values of relevant test statistics are shown in parentheses below the estimated coefficients.
Using Model B, which of the following is the alternative hypothesis for testing the significance of Time?

• A) H_A: β₁ = 0
• B) H_A: β₁ = 0 and β₃ = 0
• C) H_A: β₁ ≠ 0
• D) H_A: β₁ ≠ 0 or β₃ ≠ 0

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Definitions:

Age

A measure of the length of time that a person or object has existed.

Level Of Education

A measure of the highest degree of formal schooling completed or the extent of academic achievement.

Causation

Refers to the relationship between cause and effect, where one action or event directly results in another.

Multiple Choice

A question format that presents a list of options or answers, from which the respondent selects the correct one.