IHI Insurance have conducted a multiple linear regression an

IHI Insurance have conducted a multiple linear regression analysis to predict the value of the number of annual claims incurred by a motor insurance policyholder (y) based on the age of the policyholder in years (x*) and the value of the car insured in thousands of dollars (x2). The analysis was based on a random sample of 500 policyholders. The ages in the sample ranged from 16 to 70 and the values of the cars in the sample ranged from $1,100 to $52,000. The multiple linear regression equation corresponding to IHI\'s analysis is: yi = 13 + (-O.5Jx1j + (0.1)x2j. Select whether the following statements regarding the multiple linear regression equation are true or false:

Solution

a)

As

yi = 13 + (-0.5)(x1i) + 0.1(x2i)

Then as x1i = 26, x2i = 20, then

yi = 13 - 0.5*26 + 0.1*20 = 2 (NOT 28)

Thus, it is FALSE. [ANSWER, FALSE]

*********************

b)

As the coefficient of x1i is negative, it will decrease, by 0.5.

TRUE. [ANSWER]

********************

c)

As the coefficient of x2i is positive, it will increase, by 0.1.

TRUE. [ANSWER]