THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION: A loan officer is interested in examining the determinants of the total dollar value of residential loans made during a month.She used Y = β 0 + β 1 X 1 + β 2 X 2 + β 3 X 3 + β 4 X 4 + ε to model the relationship,where Y is the total dollar value of residential loans in a month (in millions of dollars),X 1 is the number of loans,X 2 is the interest rate,X 3 is the dollar value of expenditures of the bank on advertising (in thousands of dollars),and X 4 is a dummy variable equal to 1 if the observation is either June,July,or August. -Suppose that she obtained = 3.8 + 0.23x₁ - 1.31x₂ + 0.032x₃ + 1.05x₄ by using data from the past 24 months.How would we interpret the coefficient on x₄? A)On an average,we would expect an additional 1.05 loans per month during June,July,and August. B)On an average,we would expect an additional $1.05 million in loans during June,July,and August. C)On an average,we would expect an additional 1.05% increase in loans during June,July,and August. D)There is no difference in the total residential loan amount between the months of June and September.

Question

Quizplus · Accepted Answer

The coefficient for the dummy variable x₄ is 1.05, which means that on an average, we would expect an additional $1.05 million in residential loans during the months of June, July, and August compared to the other months. Therefore, option B is the correct interpretation of the coefficient.