Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

In 2011, home prices and mortgage rates fell so far that in a number of cities the monthly cost of owning a home was less

In 2011, home prices and mortgage rates fell so far that in a number of cities the monthly cost of owning a home was less expensive than renting. The following data show the average asking rent for 10 markets and the monthly mortgage on the median priced home (including taxes and insurance) for 10 cites where the average monthly mortgage payment was less than the average asking rent (The Wall Street Journal, November 2627, 2011).

Click on the datafile logo to reference the data.

City Rent ($) Mortgage ($)
Atlanta 840 539
Chicago 1,062 1,002
Detroit 823 626
Jacksonville 779 711
Las Vegas 796 655
Miami 1,071 977
Minneapolis 953 776
Orlando 851 695
Phoenix 762 651
St. Louis 723 654

(a) Develop a scatter chart for these data, treating the average asking rent as the independent variable. Choose the correct scatter chart below.
(i)
(ii)
(iii)
(iv)
- Select your answer -Chart (i)Chart (ii)Chart (iii)Chart (iv) (Item 1)
Does a simple linear regression model appear to be appropriate?
The scatter chart suggests that rent is - Select your answer -positively or not or negatively(Item 2) related to mortgage. It is - Select your answer -clear or not clearI(tem 3) that the relationship is linear, and so a simple linear regression model - Select your answer -will or may not (Item 4) be appropriate.
(b) Use a simple linear regression model to develop an estimated regression equation to predict the monthly mortgage on the median priced home given the average asking rent. If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300)
= + x?
Construct a plot of the residuals against the independent variable rent. Based on this residual plot, does a simple linear regression model appear to be appropriate?
- Select your answer -yes or no(Item 7)
(c) Using a quadratic regression model, develop an estimated regression equation to predict the monthly mortgage on the median-priced home, given the average asking rent. If required, round your answers to three decimal places.
Let x represent Rent ($).
Let x2 represent Rent Squared.
= - x + x2 ?
(d) Do you prefer the estimated regression equation developed in part (a) or part (c)?
- Select your answer -part (a) or part (c) (Item 12)
Create a plot of the linear and quadratic regression lines overlaid on the scatter chart of the monthly mortgage on the median-priced home and the average asking rent to help you assess the two regression equations. Choose the correct scatter chart below.
(i)
(ii)
(iii)
(iv)
- Select your answer -Chart (i)Chart (ii)Chart (iii)Chart (iv) (Item 13)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Investments

Authors: Bradford Jordan, Thomas Miller

4th Edition

0073314978, 9780073314976

More Books

Students also viewed these Finance questions

Question

share 2 take aways from your field experience hours

Answered: 1 week ago