Question: Although the Jordan Banking System, a smaller regional bank, generally avoided the subprime mortgage market and consequently did not take money from the Federal Troubled Asset Relief Program (TARP), its board of directors has decided to look into all aspects of revenues and costs. One service the bank offers is free checking, and the board is interested in whether the costs of this service are offset by revenues from interest earned on the deposits. One aspect in studying checking accounts is to determine whether changes in average checking account balance can be explained by knowing the number of checks written per month. The sample data selected are contained in the data file named Jordan.
a. Draw a scatter plot for these data.
b. Develop the least squares regression equation for these data.
c. Develop the 90% confidence interval estimate for the change in the average checking account balance when a person who formerly wrote 25 checks a month doubles the number of checks used.
d. Test to determine if an increase in the number of checks written by an individual can be used to predict the checking account balance of that individual. Use a = 0.05. Comment on this result and the result of part c.