A large national bank charges local companies for using their services. A bank official reported the results of a regression analysis designed to predict the bank's charges ( Y)—measured in dollars per month—for services rendered to local companies. One independent variable used to predict service charges to a company is the company's sales revenue ( X)—measured in millions of dollars. Data for 21 companies who use the bank's services were used to fit the model:

Y_i = β ₀ + β ₁ X_i + ε_i

The results of the simple linear regression are provided below.

Interpret the estimate of σ, the standard deviation of the random error term (standard error of the estimate) in the model.

		About 95% of the observed service charges fall within $65 of the least squares line.
		About 95% of the observed service charges fall within $130 of the least squares line.
		For every $1 million increase in sales revenue, we expect a service charge to increase $65.
		About 95% of the observed service charges equal their corresponding predicted values.

Answer rating: 100% (QA)

Answer Approx 95 data lies within 2 standa... View the full answer