Question

In: Statistics and Probability

3. United Park City Properties real estate investment firm took a random sample of five condominium...

3. United Park City Properties real estate investment firm took a random sample of five condominium units that recently sold in the city. The sales prices Y (in thousands of dollars) and the areas X (in hundreds of square feet) for each unit are as follows     (40 points)

       

Y= Sales Price

( * $1000)

36

80

44

55

35

X = Area (square feet) (*100)

9

15

10

11

10

The owner wants to forecast sales on the basis of the area. Which variable is the dependent variable? Which variable is the independent variable?

Determine the regression equation.

Interpret the values of the slope and the intercept.

Test the significance of the slope at 1% level of significance.

Determine the coefficient of correlation between the sales price and the area.

Interpret the strength of the correlation coefficient.

Determine the coefficient of determination and present its interpretation.

Determine the coefficient of non-determination.

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.969217713

R Square

0.939382976

Adjusted R Square

0.919177301

Standard Error

5.284339356

Observations

5

ANOVA

df

SS

MS

F

Significance F

Regression

1

1298.227

1298.227

46.49105

0.006453

Residual

3

83.77273

27.92424

Total

4

1382

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept

-34.5

12.61619

-2.73458

0.071664

-74.6503

5.650339

-74.6503

5.650339

Area

7.681818182

1.126625

6.818434

0.006453

4.096395

11.26724

4.096395

11.26724

Solutions

Expert Solution

a) Sales price is dependent and Area is independent

b) Y'= -34.5+7.681818182*Area

c) To interpret coeffciients:

For every additional unit of area, Sales price increases by 7.6818182 units.

At zero Area, the minimum sales price is -34.5 units.

d) Hypothesis test:

and

The test statistic:

P-value: 0.006453

The test statistic is significant and rejects H0. There is sufficient evidence to support the claim that there is a significant relationship between two variables.

e) The correlation coefficient between two variables: r= 0.969217713

f)The correlation coefficient is strong with positive trend. To be strong r value>0.80.

h) Coefficient of determination(R-sqaured):  0.939382976

The proportion of variation explained by regression equation is 0.939382976.

i) Unexplained varition= 1- R-sqaured value= 1- 0.939382976= 0.06061702

The proportion of variation unexplained by regression equation is 0.06061702


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