In 2011, home prices and mortgage rates fell so far that in a number of cities the
Question:
a. Develop a scatter chart for these data, treating the average asking rent as the independent variable. Does a simple linear regression model appear to be appropriate?
b. Use a simple linear regression model to develop an estimated regression equation to predict the monthly mortgage on the median priced home given the average asking rent. Construct a plot of the residuals against the independent variable rent. Based on this residual plot, does a simple linear regression model appear to be appropriate?
c. Using a quadratic regression model, develop an estimated regression equation to predict the monthly mortgage on the median-priced home, given the average asking rent.
d. Do you prefer the estimated regression equation developed in part a or part c? Create a plot of the linear and quadratic regression lines overlaid on the scatter chart of the monthly mortgage on the median-priced home and the average asking rent to help you assess the two regression equations. Explain your conclusions.
Step by Step Answer:
Essentials of Business Analytics
ISBN: 978-1285187273
1st edition
Authors: Jeffrey Camm, James Cochran, Michael Fry, Jeffrey Ohlmann, David Anderson, Dennis Sweeney, Thomas Williams