BA 303 - BUSINESS STATISTICS- Week 1 Learning Unit 1, Discussion 1 Chapter 1, Problem 7

A bank developed a model for predicting the average checking and savings account balance as balance = -17,732 + 367 * age + 1,300 * years education + 0.116 * household wealth.

A) Explain how to interpret the numbers in this model.

The bank developed a predictive model that should be able to estimate an average checking and savings account balance. The model begins with a constant estimated withdrawal amount set at $17,732 which would be subtracted from the combined amount they estimated would be deposited ($367 * age), the additional amount estimated to be deposited based on the person’s level of education ($1,300 * years of education), and the additional amount that may be deposited based on the total household wealth (0.116 * household wealth).

B) Suppose that a customer is 32 years old, is a college graduate (so that years education = 16), and has a household wealth of $150,000. What is the predicted bank balance?

Age- 32 Years of education- 16 Household Wealth- $150,000

Predicted bank balance= (-17732)+(367*32)+(1300*16)+(0.116*150000)

= (-17732)+(11744)+(20800)+(17400)

= $32,212