Waterbury Insurance Company wants to study the relationship between the amount o

Question

Waterbury Insurance Company wants to study the relationship between the amount of fire damage and the distance between the burning house and the nearest fire station. This information will be used in setting rates for insurance coverage. For a sample of 30 claims for the last year, the director of the actuarial department determined the distance from the fire station (X) and the amount of fire damage, in thousands of dollars (Y). The MegaStat output is reported below.

Is there a direct or indirect relationship between the distance from the fire station and the amount of fire damage?

How much damage would you estimate (in dollars) for a fire 5 miles from the nearest fire station? (Round your answer to the nearest dollar amount.)

Fill in the blank below. (Round your answer to 1 decimal place.)

State the decision rule for .01 significance level: H0 : = 0; H1 : 0. (Negative amounts should be indicated by a minus sign. Round your answers to 3 decimal places.)

Is there any significant relationship between the distance from the fire station and the amount of damage? Use the .01 significance level.

Waterbury Insurance Company wants to study the relationship between the amount of fire damage and the distance between the burning house and the nearest fire station. This information will be used in setting rates for insurance coverage. For a sample of 30 claims for the last year, the director of the actuarial department determined the distance from the fire station (X) and the amount of fire damage, in thousands of dollars (Y). The MegaStat output is reported below.

Explanation / Answer

a1) Regression equation will be

y = 12.360+4.796X

a2) There is Direct relationship

b) Y = 12.360+4.796*5

Y = $36

c1) Coefficient of determination will be 1864.5782/3209.0716 = 0.581

c2) 58.1% of the variation in damage is explained by variation in distance.

d1) Coefficient of correlation = Sqrt(0.581) = 0.762

d2) Fairly Direct

d3) It is Positive because the slope is positive

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