Waterbury Insurance Company wants to study the relationship

Waterbury Insurance Company wants to study the relationship between the amount of fire damage and the distance between the burning house and the nearest fire station. This information will be used in setting rates for insurance coverage. For a sample of 30 claims for the last year, the director of the actuarial department determined the distance from the fire station (X) and the amount of fire damage, in thousands of dollars (Y). The MegaStat output is reported below. (e-1) State the decision rule for .01 significance level: H0 : p = 0; H1 : p not equals to 0. (Negative amounts should be indicated by a minus sign. Round your answers to 3 decimal places.) (e-2) Compute the value of the test statistic. (Round your answer to 2 decimal places.) Value of the test statistic

Solution

(e-1) The degree of freedom=n-2=30-2=28

Given a=0.01, t(0.005, df=28) = -2.763 or 2.763 (from student t table)

Reject Ho if t< -2.763 or t> 2.763

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(e-2) The test statistic is

t=coefficients/std. error

=3.7708/7.977

=0.47