Ann is analyzing a data set that contains two variables, Job Title and 401K. 401K contains the name of the three companies that carry the retirement accounts. It is mandatory to have an account, thus no observation is blank. If 401K was transformed to dummy variables, how many should be created?
A) 2
B) 3
C) 4
D) 1

Question

Quizplus · Accepted Answer

When transforming a categorical variable with three categories into dummy variables, one less than the number of categories is needed, hence 2 dummy variables are sufficient to represent all three companies.

Ann Is Analyzing a Data Set That Contains Two Variables