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

question 89

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,what is the null hypothesis for testing the joint significance of the variable Time and the interaction variable Time × Prime?

• A) H₀: β₁ = β₂ = β₃ = 0
• B) H₀: β₁ = 0 and β₃ = 0
• C) H₀: β₁ = 0 or β₃ = 0
• D) H₀: β₁ ≠ 0 or β₃ ≠ 0

Determine the critical value for hypothesis testing in different scenarios.

Understand the role and calculation of degrees of freedom in hypothesis testing.

Apply hypothesis testing concepts to various fields and research questions.

Understand the concept and purpose of incentive pay and how it influences employee behavior.

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Definitions:

Opportunity Cost

The loss of potential gain from other alternatives when one option is chosen.

Cost Formula

An equation or method used to determine the total cost of producing goods or services, combining fixed costs, variable costs, and sometimes semi-variable costs.

Variable Selling Expenses

Costs that vary directly with the volume of sales, such as commissions and shipping fees.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much revenue is available to cover fixed expenses and to contribute to profit.