When an insurance company is going to write a new home owner policy, one concern is the distance between

When an insurance company is going to write a new home owner policy, one concern is the distance between

When an insurance company is going to write a new home ownerpolicy, one concern is the distance between the house and thenearest fire department station. This is one factor that goes in todetermining the cost of the insurance for the home owner. ETBInsurance Company wants to determine if there is a relationshipbetween the distance to a fire station and the amount of firedamage to a house. A random sample of 50 claims was selected foranalysis. The correlation coefficient was 0.78. Which is thecorrect interpretation and recommendation?A. There is not a strong enough relationship so as tobe able to use distance to a firehouse as a factor in determininginsurance rates.B. The strong inverse relationship indicates thatdistance to a fire station is a reliable variable to consider as afactor in determining insurance rates.C. The variable, distance to a fire station, is able toexplain 78% of the variation in the problem and so it is areasonable factor to use in determining insurance rates.D. The strong relationship indicates that distance to afire station is a reasonable factor to be considered whendetermining insurance rates.


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