SCENARIO 13-1
a Large National Bank Charges Local Companies for Using

Multiple Choice

SCENARIO 13-1
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: $$Y _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { i } + \varepsilon _ { i }$$
The results of the simple linear regression are provided below.
$$\hat { Y } = - 2,700 + 20 X , S _ { X X } = 65 , \text { two-tail } p \text { value } = 0.034 \left( \text { for testing } \beta _ { 1 } \right)$$
-Referring to Scenario 13-1, interpret the estimate of $\beta _ { 0 }$ , the Y-intercept of the line.

A) All companies will be charged at least $2,700 by the bank.
B) There is no practical interpretation since a sales revenue of $0 is a nonsensical value.
C) About 95% of the observed service charges fall within $2,700 of the least squares line.
D) For every $1 million increase in sales revenue, we expect a service charge to decrease $2,700.