Credit Scores An economist wants to determine the relation between ones FICO score, x

Chapter 14, Problem 12

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Credit Scores An economist wants to determine the relation between ones FICO score, x, and the interest rate of a 36-month auto loan, y. The data represent the interest rate (in percent) a bank might offer on a 36-month auto loan for various FICO scores. Credit Score, x Interest Rate (percent), y 545 18.982 595 17.967 640 12.218 675 8.612 705 6.680 750 5.150 Source: www.myfico.com Use the results from in Section 4.2 to answer the following questions: (a) Treating credit score as the explanatory variable, x, determine the estimates of b0 and b1. (b) Compute the standard error of the estimate, se. (c) A normal probability plot of the residuals indicates it is reasonable to conclude the residuals are normally distributed. Determine sb1 . (d) Test whether a linear relation exists between credit score and interest rate at the a = 0.05 level of significance. (e) Construct a 95% confidence interval about the slope of the true least-squares regression line.