Question: Exercise 1: Correlation and Linear Regression For the following exercise, characterize the relationship of the variables and interpret the F-test for the regression model. Using

Exercise 1: Correlation and Linear Regression

For the following exercise, characterize the relationship of the variables and interpret the F-test for the regression model. Using thep-value approach, determine whether the null hypothesis for the F-test is rejected or not. Discuss why or why not. Interpret the implication of these findings for the model.

(a) Can you determine any correlation between the independent variablesDays (number of days the property is on the market)and thePrice (market price in dollars)? Similarly, are theSize (livable square feet of the property)and thePrice(market price in dollars)correlated? Use the .05 significance level. State thep-value of the test.

(b) With thePrice (market price in dollars)as the dependent variable and theSize (livable square feet of the property)of the home as the independent variable, determine the regression equation and interpret the confidence level, the precision, and reliability of the sample. Using the regression model, forecast the future marketPricefor a home with a livable area of 2,200 square feet. Determine the 95% prediction interval for the market price of a home with a livable area of 2,200 square feet.

Exercise 2: Multiple Regression Analysis

Conduct the following analyses using thePrice (market price in dollars)as the dependent variable, determine the regression equation with theBedrooms (number of bedrooms),Size (livable square feet of the property),Township (area the property is located), and theBaths (number of bathrooms)as independent variables.

(a) Develop a correlation matrix and discuss which independent variables have strong or weak correlations with the dependent variable. Utilize these results to discuss any issues with problems with the multicollinearity.

(b) Use Excel to determine the multiple regression equation. Discuss how you selected the variables to include in the equation. Your regression equation should demonstrate a significant relationship. Report and interpret the R-square.

(c) Using your results fromQuestion (b) evaluate the addition of the variables;Pool (1 = yes, 0 = no), and attachedGarage (1 = yes, 0 = no).Report your results and conclusions.

(d) Develop a histogram of the residuals from thefinal regressionequation developed inQuestion (c). Is it reasonable to conclude that the normality assumption has been met?

(e) Plot the residuals against the fitted values from thefinal regressionequation developed inQuestion (c). Plot the residuals on the vertical axis and the fitted values on the horizontal axis.

North Valley Real Estate Case Study Data Set
recordAgentPriceSizeBedroomsBathsPool (yes is 1)Garage (Yes is 1)DaysTownshipMortgage typeYearsFICODefault (Yes is 1)
1Marty206424182021.511332Fixed28240
2Rose34615030103200364Fixed98200
3Carter37236032104301212Fixed188190
4Peterson310622333032.510263Fixed178170
5Carter496100451064.501134Fixed178160
6Peterson29408634404311314Fixed198130
7Carter228810263042.501394Adjustable108130
8Isaacs384420447053.501262Fixed68120
9Peterson416120404053.501264Fixed38100
10Isaacs48749443806411323Fixed68080
11Rose44880052806401354Fixed88061
12Peterson38896044204301502Adjustable98051
13Marty335610297032.501253Adjustable98011
14Rose276000230021.500341Fixed207980
15Rose34642129704311173Adjustable107950
16Isaacs45391336606411123Fixed187920
17Carter376146329053.511282Adjustable97921
18Peterson694430590053.511363Adjustable107880
19Rose25126920503211383Fixed167860
20Rose547596492064.511375Fixed27850
21Marty214910195021.510204Fixed67840
22Rose188799195021.510521Fixed107820
23Carter45995046804311314Fixed87810
24Isaacs264160254032.501401Fixed187800
25Carter39355731804311541Fixed207760
26Isaacs478675466053.511265Adjustable97730
27Carter384020422053.501234Adjustable97721
28Marty31320036004301313Fixed197720
29Isaacs27448229903210373Fixed57690
30Marty167962192021.511315Fixed67690
31Isaacs175823197021.510285Adjustable97661
32Isaacs22649825204311283Fixed87631
33Carter31682731504311224Fixed27591
34Carter189984155021.510222Fixed177580
35Marty36635030903211233Fixed57541
36Isaacs41616040804301254Fixed127530
37Isaacs30800035004301372Fixed187520
38Rose29435726204311154Fixed107510
39Carter33714427904311193Fixed157490
40Peterson29973029103200312Fixed137480
41Rose44574043704301193Fixed57460
42Rose41059242004311271Adjustable97411
43Peterson667732557053.511295Fixed47400
44Rose52358450506411195Adjustable107390
45Marty33600033603200323Fixed67370
46Marty20259822703210281Fixed107370
47Marty326695283032.510304Fixed87360
48Rose32132027703201234Fixed67360
49Isaacs24682028704301275Fixed137350
50Isaacs54608459106411355Adjustable107310
51Isaacs793084680085.511274Fixed67290
52Isaacs174528160021.510392Fixed157280
53Peterson39255439704311304Fixed177260
54Peterson26316030603201263Fixed107260
55Rose237120190021.510143Fixed187230
56Carter225750215021.511272Fixed157150
57Isaacs84842071906401491Fixed57100
58Carter371956311053.511295Fixed87100
59Carter404538329053.511242Fixed147070
60Rose25009028104301185Fixed117040
61Peterson369978383042.511274Fixed107030
62Peterson209292163021.510183Fixed107010
63Isaacs190032185021.511304Adjustable26750
64Isaacs216720252032.50024Adjustable56741
65Marty32341732204311224Adjustable26730
66Isaacs31621030703200301Adjustable16730
67Peterson226054209021.511281Adjustable66700
68Marty18392020903200302Adjustable86691
69Rose248400230032.511502Adjustable46670
70Isaacs466560576053.501424Adjustable36650
71Rose66721261106411213Adjustable86621
72Peterson362710437042.501241Adjustable26560
73Rose265440316053.511225Adjustable36530
74Rose70659666007511403Adjustable76521
75Marty29370033003200144Adjustable76471
76Marty199448233021.511253Adjustable56441
77Carter36953342304311322Adjustable26420
78Marty230121203021.510212Adjustable36390
79Marty169000169021.500201Adjustable76391
80Peterson190291204021.511314Adjustable66311
81Rose39358446604311343Adjustable76301
82Marty363792286032.511485Adjustable36260
83Carter360960384064.501322Adjustable56261
84Carter31087731803211401Adjustable66241
85Peterson919480767085.511304Adjustable16230
86Carter39290434003210402Adjustable86181
87Carter200928184021.511364Adjustable36181
88Carter53790048906401231Adjustable76140
89Rose258120239032.501231Adjustable66141
90Carter55834261606411243Adjustable76130
91Marty302720344042.501383Adjustable36091
92Isaacs240115222021.510395Adjustable16090
93Carter79365665307511534Adjustable36051
94Peterson218862193021.510584Adjustable16040
95Peterson38308135103211272Adjustable66011
96Marty35152033803201352Adjustable85991
97Peterson84149170306411504Adjustable85961
98Marty336300285032.500281Adjustable65951
99Isaacs31286337506411124Adjustable25950
100Carter27503330603211273Adjustable35930
101Peterson229990211021.500373Adjustable65911
102Isaacs195257213021.510115Adjustable85911
103Marty194238165021.511302Adjustable75901
104Peterson34852827404311275Adjustable35841
105Peterson241920224021.501345Adjustable85831

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