Question: In Problem 13.4 on page 469, you used efficiency ratio and total risk based capital stored in CommunityBanks to predict ROA at a community bank.

In Problem 13.4 on page 469, you used efficiency ratio and total risk based capital stored in CommunityBanks to predict ROA at a community bank. Develop a regression model to predict ROA that includes efficiency ratio, total risk based capital, and the interaction of efficiency ratio and total risk based capital.

a. At the 0.05 level of significance, is there evidence that the interaction term makes a significant contribution to the model?

b. Which regression model is more appropriate, the one used in (a) or the one used in Problem 13.4? Explain.

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