Question

The owner of Maumee Motors wants to study the relationship between the age of a car and its selling price. Listed below is a random sample of 12 used cars sold at Maumee Motors last year:

Car

Age (years)

Selling Price ($ ‘000)

Car

Age (years)

Selling Price ($ ‘000)

1

9

8.1

7

8

7.6

2

7

6.0

8

11

8.0

3

11

3.6

9

10

8.0

4

12

4.0

10

12

6.0

5

8

5.0

11

6

8.6

6

7

10.0

12

6

8.0

Required:

a. Determine the independent and dependent variables

b. Determine the regression equation

c. Estimate the selling price of a 10-year old car

d. Interpret the regression equation.

e. Determine the standard error of the estimate

f. Construct a 98% confidence interval for Y, if a car is 10-year old

g. Construct a 98% prediction interval for Y, if a car is 10-year old

Answer 1

DATA :

Car	Age( Years)	Sellin Price( $'000)
1	9	8.1
2	7	6
3	11	3.6
4	12	4
5	8	5
6	7	10
7	8	7.6
8	11	8
9	10	8
10	12	6
11	6	8.6
12	6	8

a.)

y: Dependent Variable : Selling Price of Car ( $ '000)

x: Independent Variable : Age ( years )

b.)

The regression equation is
Selling Price = 11.18 - 0.4788 Age( Years)

c)

Selling Price of 10-year old Car :

Selling Price = 11.18 - 0.4788 * 10 = 6.392 ( in $'000)

d)

INTERPRETATION :

Selling Price of a Car decreases with age by a factor of 0.4788.

e)

g)

f)