Yvonne Lang, VP of Finance at Digital Components, Inc.(DCI), wants a regression model which predicts the average collection period on credit sales.Her data set includes two qualitative variables: sales discount rates (0%, 2%, 4%, and 6%), and total assets of credit customers (small, medium, and large).The number of dummy variables needed for "sales discount rate" in Yvonne's regression model is ___.
A)1
B)2
C)3
D)4
E)7

Question

Quizplus · Accepted Answer

For a categorical variable with four levels (0%, 2%, 4%, and 6%), you need three dummy variables to represent it in a regression model.