To include a nominal variable in the regression model we need to transform it into:

A) the intercept
B) an indicator variable
C) an interaction term
D) a polynomial term

Nominal variables cannot be included in regression models without first transforming them into indicator variables. An indicator variable is a binary variable that takes a value of 0 or 1 to represent the presence or absence of a category. For example, if we have a nominal variable "color" with three categories (red, green, blue), we would need to create two indicator variables (e.g. "red" and "green") with values of 0 or 1 to represent each category. Only indicator variables can be used in regression models to represent nominal variables.