solution

 

. Table 11.4 gives the estimated regression coefficient and individual t statistic for each explanatory variable in the setting of the previous exercise. The t-values are given without the sign, assuming that all tests are two-sided.

(a) What are the degrees of freedom of any individual t statistic for this model? What values of t are significant at the 5% level?

Explain carefully what significance tells us about an explanatory variable.

(b) Which of the explanatory variables are significantly different from zero in this model?

(c) The signs of many of these coefficients are what we might expect before looking at the data. For example, the negative coefficient for loan size means that larger loans get a smaller interest rate. This is reasonable. Examine the signs of each of the statisticallysignificant coefficients and give a short explanation of what they tell us.

 

 
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