The National Association of Realtors Existing-Home Sales Series provides a measurement of the residential real estate market. One of the measurements it produces is the Housing Affordability Index (HAI). It is a measure of the financial ability of U.S. families to buy a house. A value of 100 means that families earning the national median income have just the amount of money needed to qualify for a mortgage on a median-priced home; higher than 100 means they have more than enough and lower than 100 means they have less than enough. The file entitled INDEX contains the HAI and associated variables.

a. Construct a second order of the polynomial relating the HAI to the median family income.

b. Conduct a test of hypothesis to determine if this polynomial is useful in predicting the HAI. Use a p-value approach and a significance level of 0.01.

c. Determine if monthly principle and interest interacts with the relationship between the HAI and the median family income indicated in part

b. Use a significance level of 0.01. Hint:You must produce another regression equation with the interaction terms inserted.You must then use the appropriate test to determine if the interaction terms belong in this latter model.
15.38. An investment analyst collected data of 20 randomly chosen companies. The data consisted of the 52-week-high stock prices, PE ratio, and the market value of the company. These data are in the file entitled INVESTMENT. The analyst wishes to produce a regression equation to predict the market value using the 52-week-high stock price and the PE ratio of the company. He creates a complete second-degree polynomial.

a. Construct an estimate of the regression equation using the indicated variables.

b. Determine if any of the quadratic terms are useful in predicting the average market value. Use a p-value approach with a significance level of 0.10.

c. Determine if any of the PE ratio terms are useful in predicting the average market value.
Use a test statistic approach with a significance level of 0.05.