A manager at a local bank analyzed the relationship between monthly salary ( y ,

Question

A manager at a local bank analyzed the relationship between monthly salary (y, in $) and length of service (x, measured in months) for 30 employees. She estimates the following model: Salary = 0 + 1Service + . The following table summarizes a portion of the regression results.

1. Which of the following hypotheses will determine whether the intercept differs from zero?

D. H0:1 = 0; HA:1 0

2. Using the 95% confidence interval, which of the following is the conclusion to the following hypothesis test:

H0:0 = 0; HA: 0 0?

A. H0:0 = 0; HA:0 0 B. H0:b0 = 0; HA:b0 0 C. H0:b1 = 0; HA:b1 0

D. H0:1 = 0; HA:1 0

2. Using the 95% confidence interval, which of the following is the conclusion to the following hypothesis test:

H0:0 = 0; HA: 0 0?

A. At the 5% significance level, do not reject H0 because the interval does not contain 0. B. At the 5% significance level, reject H0 because the interval does not contain 0. C. At the 5% significance level, do not reject H0 because the interval contains 0. D. At the 5% significance level, reject H0 because the interval contains 0. Coefficients Standard t-stat p-value Lower Upper 95% Error 95% Intercept 784.92322.25 3.20 124.95 1,444.89 15.74 2.64 Service 9.19

Explanation / Answer

1. The hypotheses which will determine whether the intercept differs from zero is:

H0:0 = 0; HA:0 0. Hence, Option (A) is the correct choice. (Ans).

2. 95% C.I. of Intercept : [124.95, 1444.89]

We have to test: H0:0 = 0; HA:0 0

Since the 95% C.I. doesn't contain 0, we reject H0 at 5% level of significance. Hence, Option (B) is the correct choice. (Ans).

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