The following data on sale price, size, and land-to-building ratio for 10 large industrial properties appeared in the paper “Using Multiple Regression Analysis in Real Estate Appraisal” (Appraisal Journal

[2002]: 424–430):

a. Calculate and interpret the value of the correlation coef fi cient between sale price and size.

b. Calculate and interpret the value of the correlation co ef fi cient between sale price and land-to-building ratio.

c. If you wanted to predict sale price and you could use either size or land-to-building ratio as the basis for making predictions, which would you use? Explain.

d. Based on your choice in Part (c), find the equation of the least-squares regression line you would use for predicting y sale price.

Transcribed Image Text:

Sale Price (millions of Size (thousands Land-to- Building Property dollars) of sq. ft.) Ratio 1 10.6 2166 2.0 10 234567890 2.6 751 3.5 30.5 2422 3.6 1.8 224 4.7 20.0 3917 1.7 8.0 2866 2.3 10.0 1698 3.1 6.7 1046 4.8 5.8 1108 7.6 4.5 405 17.2