Question

Table #10.1.6 contains the value of the house and the amount of rental income in a year that the house brings in ("Capital and rental," 2013). Create a scatter plot and find a regression equation between house value and rental income. Then use the regression equation to find the rental income a house worth $230,000 and for a house worth $400,000. Which rental income that you calculated do you think is closer to the true rental income? Why? Table #10.1.6: Data of House Value versus Rental Value Rental Value Rental Value Rental Value Rental 81000 6656 77000 4576 75000 7280 67500 6864 95000 7904 94000 8736 90000 6240 85000 7072 121000 12064 115000 7904 110000 7072 104000 7904 135000 8320 130000 9776 126000 6240 125000 7904 145000 8320 140000 9568 140000 9152 135000 7488 165000 13312 165000 8528 155000 7488 148000 8320 178000 11856 174000 10400 170000 9568 170000 12688 200000 12272 200000 10608 194000 11232 190000 8320 214000 8528 208000 10400 200000 10400 200000 8320 240000 10192 240000 12064 240000 11648 225000 12480 289000 11648 270000 12896 262000 10192 244500 11232 325000 12480 310000 12480 303000 12272 300000 12480

Answer 1

SOl:

in excel go to inert >scatterchart

we observe a positive relationship between value and rental.

Then Go to

Data analysis >Regression

You will get below

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.764716
R Square	0.58479
Adjusted R Square	0.575764
Standard Error	1441.625
Observations	48
ANOVA
	df	SS	MS	F	Significance F
Regression	1	1.35E+08	1.35E+08	64.78736	2.5E-10
Residual	46	95600982	2078282
Total	47	2.3E+08
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%
Intercept	5363.865	567.2408	9.456062	2.34E-12	4222.068	6505.661
Value	0.024358	0.003026	8.04906	2.5E-10	0.018267	0.03045

Regression equation is

Rental=5363.865+0.024358*Value

use the regression equation to find the rental income a house worth $230,000 and for a house worth $400,000.

For value=230000

Rental=5363.865+0.024358*230000

predicted Rental=10966.2

For value=400000

Rental=5363.865+0.024358*400000

Rental=15107.07

Rental income a house worth $230,000 is closer to true rental income