Consider the Following to Answer the Question(s) Below

question 3

Multiple Choice

Consider the following to answer the question(s) below:
A Toronto accounting firm estimated a model to explain variation in client profitability. The dependent variable is client net profits and the predictor variables include the hours spent working on the client and indicator variables to denote the type of client-manufacturing, service, or government. The indicator variables have a value of one if the client is the type described. The following are the model results.

-At α = 0.05, which of the following statements is correct?

• A) The overall regression model is significant in explaining net profits.
• B) The number of hours spent on a client is not significant in explaining variation in client profitability.
• C) The indicator variables for client type are significant in explaining variation in client profitability.
• D) The regression model is significant overall, and the indicator variables for type of client are significant in explaining the variation in client profitability.
• E) All of the above statements are correct.

---

Definitions:

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Universal Life Insurance

Similar to whole life insurance; the cash value can be used to pay the insurance premium if the policyholder doesn’t pay it, but if the cash value is not enough to pay the insurance, the policy can lapse.

Premium Payment

The amount paid for an insurance policy, either as a lump sum or in installments.

Cash Value

The amount available in cash for an insurance policy or investment account, often accessible to the policyholder or investor.