Concept explainers
Problems 7–12 use the results from Problems 25–30 in Section 4.1 and Problems 17–22 in Section 4.2.
8. Credit Scores Use the results from Problem 26 in Section 4.1 and Problem 18 in Section 4.2 to:
- a. Determine the coefficient of determination, R2.
- b. Interpret the coefficient of determination.
Reference 1
18. Credit Scores (Refer to Problem 26, Section 4.1.) An economist wants to determine the relation between one’s FICO score, x, and the interest rate of a 36-month auto loan, y. The given data represent the interest rate (in percent) a bank would offer on a 36-month auto loan for various FICO scores.
Credit Score, x | Interest Rate (percent), y |
545 | 18.982 |
595 | 17.967 |
640 | 12.218 |
675 | 8.612 |
705 | 6.680 |
750 | 5.150 |
Source: www.myfico.com |
- a. Find the least-squares regression line treating the FICO score, x, as the explanatory variable and the interest rate, y, as the response variable.
- b. Interpret the slope and y-intercept, if appropriate.
Note: Credit scores have a
- c. Predict the interest rate a person would pay if her FICO score were the
median score of 723. - d. Suppose Bob has a FICO score of 680 and he is offered an interest rate of 8.3%. Is this a good offer? Why?
Reference 2
26. Credit Scores Your Fair Isaacs Corporation (FICO) credit score is used to determine your creditworthiness. It is used to help determine whether you qualify for a mortgage or credit and is even used to determine insurance rates. FICO scores have a range of 300 to 850, with a higher score indicating a better credit history. The given data represent the interest rate (in percent) a bank would offer on a 36-month auto loan for various FICO scores.
Credit Score | Interest Rate (percent) |
545 | 18.982 |
595 | 17.967 |
640 | 12.218 |
675 | 8.612 |
705 | 6.680 |
750 | 5.150 |
Source: www.myfico.com |
- a. Which variable do you believe is likely the explanatory variable and which is the response variable?
- b. Draw a
scatter diagram of the data. - c. Determine the linear
correlation coefficient between FICO score and interest rate on a 36-month auto loan. - d. Does a linear relation exist between the FICO score and interest rate?
Want to see the full answer?
Check out a sample textbook solutionChapter 4 Solutions
Fundamentals of Statistics (5th Edition)
- (a) For United States, provide data for the variables below over the years 1993 – 2007: (i) Net migration rate (per 1,000 population) (ii) Total fertility rate (live births per woman) (iii)Unemployment, general level (Thousands) (iv) Wages (v) Life expectancy at birth for both sexes combined (years) Data can be obtained from the UN database http://data.un.org/Explorer.aspx Using R-Studio, estimate a regression equation to determine the effect of unemployment, general level, wages and life expectancy at birth for both sexes on the net migration rate. (All codes and regression output should be provided).(b) Using R-Studio redo the regression analysis with the total fertility rate as an additionalindependent variable. (All codes and regression output should be provided).(i) Write down the regression equation. (ii) Use the 5% level of significance, determine and discuss whether the total fertilityrate has a significant impact on the net migration rate in your assigned country.…arrow_forwardAnswer parts d,e, and f, please.arrow_forward1.Income on Housing = 28% 2.Food = 15% 3.Clothing = 11% 4.Transportation = 15% 5.Education = 11% 6.Recreation = 7% 7.Miscellaneous = 7% Total Expenditures(%) = 94% 6% is his savings which is $200 per month Let x his monthly earningsarrow_forward
- 1. (10 ) According to the PayScale data from 2021, the average starting salaries by college major for bachelor's degree are as follows: $70,600 for mechanical engineering, $56,700 for economics, $43,500 for chemistry, and $47,000 for philosophy. In order to estimate the true difference in the average starting salaries by college major in 2022, 60 graduates with these four majors from the class of 2022 were contacted and questioned about their starting salaries. Propose a regression model with dummy variables that could be used to investigate if starting salaries are different by college major and interpret all the coefficients in the model. 0.000arrow_forward150. A corporation’s annual profits and losses for a six-year period are shown in the graph inFigure 13–30.Figure 13–30a. What is the increase or decrease in profits for the years listed?(1) the 1st to the 2nd year(2) the 2nd to the 4th year(3) the 3rd to the 5th year(4) the 4th to the 6th yearb. What is the total dollar amount lost by the corporation from the 3rd through the 5th year?c. What is the net profit or loss for the 6-year period?d. What is the average annual profit or loss for the 6-year period?arrow_forwardThe attached file contains hypothetical data for working this problem. Goodman Corporation’s and Landry Incorporated’s stock prices and dividends, along with the Market Index, are shown in the file. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends. Construct a scatter diagram graph that shows Goodman’s and Landry’ returns on the vertical axis and the Market Index’s returns on the horizontal axis.arrow_forward
- The data shown indicate the number of wins and the number of points scored for teams in a hockey league. Use a TI-83 Plus/TI-84 Plus calculator to construct the scatter plot. No. of wins, x 11 6 5 9 10 9 7 8 No. of points, y 15 26 29 20 16 18 24 23 Send data to Excel Part: 0 / 2 Part 1 of 2 Select the correct graph. Graph A Graph B y y 30+ 30 25 - 25 20- 20 15- 15 10- 10-arrow_forwarda) For United States, provide data for the variables below over the years 1993 – 2007: (i) Net migration rate (per 1,000 population) (ii) Total fertility rate (live births per woman) (iii)Unemployment, general level (Thousands) (iv) Wages (v) Life expectancy at birth for both sexes combined (years) Data can be obtained from the UN database http://data.un.org/Explorer.aspx Using R-Studio, estimate a regression equation to determine the effect of unemployment, general level, wages and life expectancy at birth for both sexes on the net migration rate. (All codes and regression output should be provided).(i) Write down the regression equation. (ii) Interpret the coefficients and determine which of the individual coefficients in theregression model are statistically significant. In responding, construct and test anyappropriate hypothesis. (iii) Interpret the coefficient of determination. (iv) Using the 10% level of significance, determine and discuss whether the overallregression equation…arrow_forwardResidents in a city are charged for water usage every three months. The water bill is computed from a common fee, along with the amount of water the customers use. The last water bills for 40 residents from two different neighborhoods are shown in the histograms below. Pine Road Neighbors Front Street Neighbors 15 15 10 10 5. 100 125 150 175 200225250 100 125 150 175 200 225 250 Y Frequency Frequencyarrow_forward
- Question content area top Part 1 Suppose the following table represents world oil production in millions of barrels a day for a recent period of time. Complete parts a and b. Region Oil Production (millions of barrels a day) Iran 2.04 Saudi Arabia 6.91 Other OPEC countries 16.13 Non-OPEC countries 62.41 Question content area bottom Part 1 a. Compute the percentage of values in each category. Region Oil Production (millions of barrels a day) Percentage Iran 2.04 enter your response here% Saudi Arabia 6.91 enter your response here% Other OPEC countries 16.13 enter your response here% Non-OPEC countries 62.41arrow_forwardQuestion d and e.arrow_forwardTHE FOLLOWING FIGURE IS USED TO ANSWER THE FOLLOWING QUESTION. The percentage of deaths due to pneumonia, Influenza, and COVID-19: Figure 1 NCHS Mortality Reporting System: Pneumonia, Influenza, and COVID-19 Mortality of Deaths Due to Poeumonia, influents, and COVID-19 * * 12 30 40 NCHS Mortality Reporting System: Pneumonia, Influenza, and COVID-19 Mortality Data through the week ending April 11, 2020, as of April 16, 2020 50 Tidenk Threshold Seasonal Baseline 2018 10 20 50 -% of Deaths due to Pneumoni, Influenx or COVID-19 30 MMWK Week was higher than expected for the majority of 2018 and 2019. W in week 10 of 2020 was roughly 3X greater than expected. O on average met the level of epidemic in week 20 of 2019 O is highest mid-year and lowest at the end of each year.arrow_forward
- MATLAB: An Introduction with ApplicationsStatisticsISBN:9781119256830Author:Amos GilatPublisher:John Wiley & Sons IncProbability and Statistics for Engineering and th...StatisticsISBN:9781305251809Author:Jay L. DevorePublisher:Cengage LearningStatistics for The Behavioral Sciences (MindTap C...StatisticsISBN:9781305504912Author:Frederick J Gravetter, Larry B. WallnauPublisher:Cengage Learning
- Elementary Statistics: Picturing the World (7th E...StatisticsISBN:9780134683416Author:Ron Larson, Betsy FarberPublisher:PEARSONThe Basic Practice of StatisticsStatisticsISBN:9781319042578Author:David S. Moore, William I. Notz, Michael A. FlignerPublisher:W. H. FreemanIntroduction to the Practice of StatisticsStatisticsISBN:9781319013387Author:David S. Moore, George P. McCabe, Bruce A. CraigPublisher:W. H. Freeman