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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. | ||||||||||||||||
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- 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. | |||||||||||||||||
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