SCENARIO 14-10 You worked as an intern at We Always Win Car Insurance Company last summer.You notice that individual car insurance premiums depend very much on the age of the individual and the number of traffic tickets received by the individual.You performed a regression analysis in EXCEL and obtained the following partial information:
-Referring to Scenario 14-10, to test the significance of the multiple regression model, the null hypothesis should be rejected while allowing for 1% probability of committing a type I error.

Question

SCENARIO 14-10 You worked as an intern at We Always Win Car Insurance Company last summer.You notice that individual car insurance premiums depend very much on the age of the individual and the number of traffic tickets received by the individual.You performed a regression analysis in EXCEL and obtained the following partial information:  
-Referring to Scenario 14-10, to test the significance of the multiple regression model, the null hypothesis should be rejected while allowing for 1% probability of committing a type I error.

Quizplus · Accepted Answer

In hypothesis testing, the null hypothesis is typically that there is no significant relationship between the independent variables and the dependent variable. Therefore, if the null hypothesis is rejected while allowing for a low probability of committing a type I error (such as 1%), it means that the evidence supports the conclusion that there is a significant relationship between the variables in the multiple regression model. To test the significance of the multiple regression model, we conduct an F-test with the null hypothesis being that all regression coefficients are equal to zero. If the calculated F-value is greater than the critical F-value at the chosen significance level, we reject the null hypothesis and conclude that the multiple regression model is significant. In this case, the null hypothesis should be rejected at the 1% significance level, which means that there is strong evidence that the independent variables (age and number of traffic tickets) have a significant linear relationship with the dependent variable (car insurance premium).

SCENARIO 14-10 You Worked as an Intern at We Always