Exhibit 17.4.A researcher wants to examine how the remaining balance on $100,000 loans taken 10-20 years ago depends on whether the loan was a prime or sub-prime loan.He collected a sample of 25 prime loans and 25 sub-prime loans and records the data in the following variables: Balance = the remaining amount of loan to be paid off (in dollars) ,
Time = the time elapsed from taking the loan,
Prime = a dummy variable assuming 1 for prime loans,and 0 for sub-prime loans.
The regression results obtained for the models:
Model A: Balance = β₀ + β₁Prime + ε
Model B: Balance = β₀ + β₁Time + β₂Prime + β₃Time × Prime + ε
Model C: Balance = β₀ + β₁Prime + β₂Time × Prime + ε,
Are summarized below. Note.The values of relevant test statistics are shown in parentheses below the estimated coefficients.
Refer to Exhibit 17.4.Using Model B,what is the value of the test statistic for testing the joint significance of the variable Time and the interaction variable Time × Prime?

Question

Exhibit 17.4.A researcher wants to examine how the remaining balance on $100,000 loans taken 10-20 years ago depends on whether the loan was a prime or sub-prime loan.He collected a sample of 25 prime loans and 25 sub-prime loans and records the data in the following variables: Balance = the remaining amount of loan to be paid off (in dollars) ,
Time = the time elapsed from taking the loan,
Prime = a dummy variable assuming 1 for prime loans,and 0 for sub-prime loans.
The regression results obtained for the models:
Model A: Balance = β₀ + β₁Prime + ε
Model B: Balance = β₀ + β₁Time + β₂Prime + β₃Time × Prime + ε
Model C: Balance = β₀ + β₁Prime + β₂Time × Prime + ε,
Are summarized below.

Note.The values of relevant test statistics are shown in parentheses below the estimated coefficients.
Refer to Exhibit 17.4.Using Model B,what is the value of the test statistic for testing the joint significance of the variable Time and the interaction variable Time × Prime?

Quizplus · Accepted Answer

The Answer of Exhibit 17.4.A researcher wants to examine how the remaining balance on $100,000 loans taken 10-20 years ago depends on whether the loan was a prime or sub-prime loan.He collected a sample of 25 prime loans and 25 sub-prime loans and records the data in the following variables: Balance = the remaining amount of loan to be paid off (in dollars), Time = the time elapsed from taking the loan, Prime = a dummy variable assuming 1 for prime loans,and 0 for sub-prime loans. The regression results obtained for the models: Model A: Balance = β₀ + β₁Prime + ε Model B: Balance = β₀ + β₁Time + β₂Prime + β₃Time × Prime + ε Model C: Balance = β₀ + β₁Prime + β₂Time × Prime + ε, Are summarized below. Note.The values of relevant test statistics are shown in parentheses below the estimated coefficients. Refer to Exhibit 17.4.Using Model B,what is the value of the test statistic for testing the joint significance of the variable Time and the interaction variable Time × Prime? A)-0.64 B)-5.36 C)2.03 D)2.74