Calculating Distance with Categorical Predictors. This exercise with a tiny dataset illustrates the calculation of Euclidean distance, and the creation of binary dummies. The online education company Statistics.com segments its customers and prospects into three main categories: IT professionals (IT), statisticians (Stat), and other

(Other). It also tracks, for each customer, the number of years since first contact

(years). Consider the following customers; information about whether they have taken a course or not (the outcome to be predicted) is included:

Customer 1: Stat, 1 year, did not take course Customer 2: Other, 1.1 year, took course

a. Consider now the following new prospect:

Prospect 1: IT, 1 year Using the above information on the two customers and one prospect, create one dataset for all three with the categorical predictor variable transformed into 2 binaries, and a similar dataset with the categorical predictor variable transformed into 3 binaries.