Question

Question 2(E): The following model test the effect of Credit Score and Student status on Insurance Premium (response variable): Insurance Premium is in S and Credit Score is in number of units (increasing implies better credit worthiness and lower default risk). Student is a dummy variable, which is equal to 1 if a person is student and 0 if the person is non- student. Coefficient t-statistic p-value Intercept 105.2 -13.64 <0.000 Student 20.1 3.92 <0.000 Credit Score -4.17 5.54 <0.000 Credit Score Student -0.78 1.33 0.18 Choose the correct statement from below: For a specific level of credit score, the insurance premium for students are likely to be higher for students as compared to non-students. The effect of Credit Score on Insurance Premium is significantly different for students vs. non-students. For a specific level of credit score, the insurance premium for students are not significantly different as compared to non-students.

Answer 1

Option A:

The equation can be written as

I= 105.2+ 20.1s -4.17c

Where I is the insurance premium; s= student dummy variable ; c= credit score.

From the equation we can see that for same credit score, if the party is a student, insurance premium increase by 20.1 points higher.