SOA Exam SRM Sample Question 23
Study guide: Exam SRM
Toby observes the following coffee prices in his company cafeteria:
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12 ounces for 1.00
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16 ounces for 1.20
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20 ounces for 1.40
The cafeteria announces that they will begin to sell any amount of coffee for a price that is the value predicted by a simple linear regression using least squares of the current prices on size.
Toby and his co-worker Karen want to determine how much they would save each day, using the new pricing, if, instead of each buying a 24-ounce coffee, they bought a 48-ounce coffee and shared it.
Calculate the amount they would save.
- A) It would cost them 0.40 more.
- B) It would cost the same.
- C) They would save 0.40.
- D) They would save 0.80.
- E) They would save 1.20.
Answer this question and see the worked solution