You worked as an intern at We Always Win Car Insurance Company last summer. You

Question

You worked as an intern at We Always Win Car Insurance Company last summer. You notice that individual car insurance programs depends very much on the age of the individual, the number of traffic tickets received by the individual, and the population density of the city in which the individual lives. You performed a regression analysis in Excel. A partial regression output is given below: Coefficients Lower 99% Upper 99% Intercept 123.80 -27.47 275.07 AGE -0.82 -3.51 1.87 TICKETS 21.25 -11.86 54.37 DENSITY -3.14 -23.19 16.91 From the above table we can conclude that: Select one:

a. AGE, TICKETS and DENSITY have a significant effect on car insurance premiums

b. AGE, TICKETS and DENSITY do not have a significant effect on car insurance premiums

c. AGE, TICKETS and DENSITY have a significant effect on car insurance premiums at 1% level of significance

d. AGE, TICKETS and DENSITY do not have a significant effect on car insurance premiums at 1% level of significance

Explanation / Answer

Since all three 99% confidence interval for AGE, TICKETS and DENSITY contains 0 ,so we can conclude that

d) AGE, TICKETS and DENSITY do not have a significant effect on car insurance premiums at 1% level of significance

[ confidence interval contains 0 means there is a chance that the coefficient will be equal to 0, that means the predictor has no effect on the response. ]

Coefficients Lower 99% Upper 99% Intercept 123.80 -27.47 275.07 AGE -0.82 -3.51 1.87 TICKETS 21.25 -11.86 54.37 DENSITY -3.14 -23.19 16.91

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