MFIN604 - Homework #6 To model the price of a flat screen TV, a junior analyst at your firm compiled the retail prices and diagonal measurements of screens. A scatter plot of the data appears below along with a linear estimate of the relationship: Coefficients Standard Error t Stat P-value Intercept 3683.24 830.0987 11.158 2.45E-07 Diagonal Size 114.7429 6.789886 16.89909 3.23E-09 Diagonal (in inches) vs. TV Price 6000 500 4000 23000 O 2000 1000 30 35 40 45 50 55 60 65 70 75 Your analyst confides, "The boss asked me to estimate the selling price for a 24 inch TV but I'm worried about my estimate. According to my calculations, we would have to pay consumers almost $1000 to take them off our hands. I double checked my data and the R' of the regression was over 0.95 so I feel confident about the inputs but I'm confused about how to interpret the results they produce." Question 1 Explain what is wrong with the analyst's work. What could you do to improve the estimation of the relationship between size and price? Be specific Question 2 Explain why such estimates of the relationship between price and size likely to be unstable over a. number of years