NEEDWORKsheet

Dataset: myield.csv

Source: A.H. Schaaf (1966). "Regional Differences in Mortgage Financing Costs", Journal of Finance, Vol. 21, pp.85-94.

Description: New Home Mortgage Yields for 18 SMSA's as well as six financial and geographic factors.

Variables (Names):

Standard Metropolitan Statistical Area (smsa)

Mortgage Yield in % (mortYld)

Average Loan/Mortgage Ratio High values ==> Low Down Payments (X1)

Distance from Boston in miles (X2)

Savings per new unit built (X3)

Savings per capita (X4)

Pop inc 1950-1960 in % (X5)

Percent of first mortgage from inter-regional banks (X6)

A study obtained mortgage yields in n=18 U.S. metropolitan areas in the 1960s. The researcher obtained the following variables and fit a linear regression model to see which factors (variables) were associated with yield (each variable was obtained for each metro area):

• Y = Mortgage Yield (Interest Rate as a %)
• X₁ = Average Loan/Mortgage Ratio (High Values Low Down Payments/Higher Risk)
• X₂ = Distance from Boston (in miles) - (Most of population was in Northeast in the 1960s)
• X₃ = Savings per unit built (Measure of Available capital versus building rate)
• X₄ = Savings per capita
• X₅ = Population increase from 1950 to 1960 (%)
• X₆ = Percent of first mortgage from inter-regional banks (Measures flow of money from outside SMSA)

For all parts, obtain the regression through a R's lm function. Conduct all tests ata = 0.05 significance level. For all parts, formally give your results, as well as computer output.

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