Real estate investment in college towns continues to promise good returns (The Wall Street Journal, September 24, 2010). With rents holding up, this is good news for investors but the same cannot be said for students. There also tends to be significant variability in rents.
Consider monthly rents of two bedroom apartments in two campus towns: Ann Arbor, Michigan, and Davis, California. A portion of the data is shown in the accompanying table.
Ann Arbor Rent....................Davis Rent
$850.........................................$744
929............................................850
⋮...................................................⋮
1450........................................1810
a. Use Excel to calculate the standard deviation of rent for Ann Arbor, Michigan, and Davis,
California.
b. Construct and interpret 95% confidence intervals for the standard deviation of rent for both Ann Arbor, Michigan, and Davis, California.
c. For each campus town, determine if the standard deviation of rent differs from $200; use α = 0.05.