12.66 The following model was fitted to data on 32 insurance companies:

yn = 7.62 - 0.16x1 + 1.23x2 R2 = 0.37 10.0082 10.4962 where yn = price-earnings ratio x1 = size of insurance company assets, in billions of dollars x2 = dummy variable taking the value 1 for regional companies and 0 for national companies The numbers in parentheses under the coefficients are the estimated coefficient standard errors.

a. Interpret the estimated coefficient on the dummy variable.

b. Test against a two-sided alternative. the null hypothesis that the true coefficient on the dummy variable is 0.

c. Test, at the 5% level, the null hypothesis b1 = b2 = 0, and interpret your result.