Answer to Question #344743 in Statistics and Probability for giang

Question

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

1

2

3

4

5

6

7

8

Interest rate (in %) x

7.0

6.6

6.0

8.5

8.0

7.5

6.5

7.0

Default rate (in 1000 loans) y

38

40

35

46

48

39

36

37

 

a/ Find the least square regression line.

b/ Perform the test H₀: b₁ = 0, H_A: b₁ $\neq$ 0 (using α = 0.05) to determine whether there is enough evidence to infer that a linear dependence exists between interest rate (x) and default rate (y).

Answer 1

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