The Denver City Bank is planning its loans for the next several years and is using a model of loan demand developed from past experience. Robert Jones is responsible for developing the mortgage loan component of total loan demand. Robert estimates the following equation using 14 years of data:

Q = 50 - .2P - .2D + .3Y + .15H, R² = .844

(17) (.13) (.16) (.08) (.06)

Here, Q denotes mortgage loan demand (in $ millions), P denotes the prime interest rate, D is the discount rate, Y is per capita income ($ thousands), and H is an index of average city housing prices ($ thousands). The standard error of the regression is 22, and standard errors are shown in parentheses.

1. Fully evaluate these regression results, including computation of t-statistics, adjusted R², and the F-statistic. Determine whether the coefficients are significantly different from zero and whether the regression equation as a whole has strong explanatory power. 

b) Robert thinks that the discount rate will be 6% in the next year, the prime rate will be 7.75%, per capita income in Denver City will be $21,000, and housing prices will be $165,000. How many loans can Denver City Bank expect to make in the next year? 

Answer rating: 100% (QA)

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