The different interest rates charged by some financial institutions may reflect how stringent their standards are for their loan appraisals: the lower the rate, the higher the standards, and hence, the lower the default rate. The data below were collected from a sample of eight financial companies selected at random. Financial company Interest rate (in %) x Default rate (in 1000 loans) y 12 3 45 7.0 50 7 6.6 6.0 8.5 8.0 7.5 6.5 7.0 56 58 48 45 49 46 47 al Find the least square regression line. b/ Perform the test Ho: Bi = 0, HA: BI + 0 (using a = 0.05) to determine whether there is enough evidence to infer that a linear dependence exists between interest rate (x) and default rate (y).

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The different interest rates charged by some financial institutions may
reflect how stringent their standards are for their loan appraisals: the lower the rate, the
higher the standards, and hence, the lower the default rate. The data below were collected
from a sample of eight financial companies selected at random.
3 4 5 6
6.0 8.5 8.0 7.5 6.5
45
7 8
7.0
47
|2
Financial company
Interest rate (in %) x
Default rate (in 1000 loans) y
1
7.0
6.6
48
50
56
58
49
46
al Find the least square regression line.
b/ Perform the test Ho: Bi = 0, Ha: BI # 0 (using a = 0.05) to determine whether there is
enough evidence to infer that a linear dependence exists between interest rate (x) and
default rate (y).
Transcribed Image Text:The different interest rates charged by some financial institutions may reflect how stringent their standards are for their loan appraisals: the lower the rate, the higher the standards, and hence, the lower the default rate. The data below were collected from a sample of eight financial companies selected at random. 3 4 5 6 6.0 8.5 8.0 7.5 6.5 45 7 8 7.0 47 |2 Financial company Interest rate (in %) x Default rate (in 1000 loans) y 1 7.0 6.6 48 50 56 58 49 46 al Find the least square regression line. b/ Perform the test Ho: Bi = 0, Ha: BI # 0 (using a = 0.05) to determine whether there is enough evidence to infer that a linear dependence exists between interest rate (x) and default rate (y).
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