Models with Categorical Variables A study was done to determine whether the gender of the credit...

Models with Categorical Variables

A study was done to determine whether the gender of the credit card holder was an important factor in generating profit for a certain credit card company. The independent variables considered were income, the number of family members, and gender of the card holder. The data can be found in the Excel file “CreditCard.” Run a multiple regression in Minitab to answer the following questions.

The Gender dummy variable was created using Male as the base.

Profit	Income	Family	Gender
157	45000	1	0
-181	55000	2	0
-253	45800	4	0
158	38000	3	0
75	75000	4	0
202	99750	4	0
-451	28000	1	0
146	39000	2	0
89	54350	1	0
-357	32500	1	0
522	36750	1	1
78	42500	3	1
5	34250	2	1
-177	36750	3	1
123	24500	2	1
251	27500	1	1
-56	18000	1	1
453	24500	1	1
288	88750	1	1
-104	19750	2	1

What is the prediction equation?

Predict profit for a female card holder with an income of 50,000 and 3 family members.

Based on the results, would the company prefer a male or female customer? Explain.

Would you say that income is an important factor in explaining the variability of profit? (Perform a hypothesis test with α = 0.05)

Would you say that number of family members is an important factor in explaining the variability of profit? (Perform a hypothesis test with α = 0.05)

What is the value of R²? What is the value of adj R²? What is the interpretation of R²?

Solutions

Expert Solution

orchestra answered 2 years ago

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