Question

A bank developed a model for predicting the average checking and savings account balance as balance= - $17,732 +367 x age + $1300 x years education +0.116 x household wealth.

a.explain how to interpret the numbers in this model
b.using excel input a customer 32 years old, is a college graduate (16 years of education) and has a household wealth of $150,000. what is predicted bank balance using excel

Answer 1

A) the balance formula is:

balance= - $17,732 +367 x age + $1300 x years education +0.116 x household wealth

On average, for every year a person has lived he or she will have $367 in their bank accounts.

This means that for every year of education that a customer completed he will have an extra $1,300 in his account.

Additional to the previous considerations, their clients will keep 11.6% of their total wealth in the bank.

B) -$17,732 + (367 x 32) + ($1,300 x 16) + (0.116 x $150,000) = -$17,732 + $11,744 + $20,800 + $17,400 = $32,212