Question

In: Statistics and Probability

In 2011 home prices and mortgage rates dropped so low that in a number of cities...

In 2011 home prices and mortgage rates dropped so low 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 cities where the average monthly mortgage payment was less than the average asking rent (The Wall Street Journal, November 26–27, 2011).

City Rent ($) Mortgage ($)
Atlanta 840 539
Chicago 1062 1002
Detroit 823 626
Jacksonville, Fla. 779 711
Las Vegas 796 655
Miami 1071 977
Minneapolis 953 776
Orlando, Fla. 851 695
Phoenix 762 651
St. Louis 723 654

Enter negative values as negative numbers.

a. Develop the estimated regression equation that can be used to predict the monthly mortgage given the average asking rent (to 2 decimals).
The regression equation is:
Mortgage ($) =  +  Rent ($)

b. Choose a residual plot against the independent variable.

SelectScatter diagram 1Scatter diagram 2Scatter diagram 3None of these choicesItem 3

c. Do the assumptions about the error term and model form seem reasonable in light of the residual plot?
SelectRelationship is significant and should assume a linear relationship, due to residual plot.Relationship is significant but shouldn't assume a linear relationship, due to residual plot.Relationship is not significant and should assume a linear relationship, due to residual plot.Relationship is not significant and shouldn't assume a linear relationship.Item 4

Enter negative values as negative numbers.

a. Develop the estimated regression equation that can be used to predict the monthly mortgage given the average asking rent (to 2 decimals).
The regression equation is:
Mortgage ($) =  +  Rent ($)

b. Choose a residual plot against the independent variable.

SelectScatter diagram 1Scatter diagram 2Scatter diagram 3None of these choicesItem 3

c. Do the assumptions about the error term and model form seem reasonable in light of the residual plot?
SelectRelationship is significant and should assume a linear relationship, due to residual plot.Relationship is significant but shouldn't assume a linear relationship, due to residual plot.Relationship is not significant and should assume a linear relationship, due to residual plot.Relationship is not significant and shouldn't assume a linear relationship.Item 4

Solutions

Expert Solution

ANSWER :


Related Solutions

In 2011 home prices and mortgage rates dropped so low that in a number of cities...
In 2011 home prices and mortgage rates dropped so low 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 cities where the average monthly mortgage payment was less than the average asking rent (The Wall Street Journal, November 26–27, 2011). Click on the webfile logo...
Mortgage interest rates and home prices 30-year mortgage rates year interest rate (%) Median home price...
Mortgage interest rates and home prices 30-year mortgage rates year interest rate (%) Median home price 1988 10.30 183,800 1989 10.30 183,200 1990 10.10 176,900 1991 9.30 173,500 1992 8.40 172,900 1993 7.30 173,200 1994 8.40 173,200 1995 7.90 169,700 1996 7.60 174,500 1997 7.60 177,900 1998 6.90 188,100 1999 7.40 203,200 2000 8.10 230,200 2001 7.00 258,200 2002 6.50 309,800 2003 5.50 329,800 1.    Generate two separate scatter plots, following the requirements below, with the data provide. a.    year...
Despite the fact that home prices seem affordable and mortgage rates are at historic lows, real...
Despite the fact that home prices seem affordable and mortgage rates are at historic lows, real estate agents say they are showing more homes, but not selling more. A real estate company estimates that an average of five people show up at an open house to view a property. There is going to be an open house on Sunday. a. What is the probability that at least five people will show up to view the property? b. What is the...
What happens to home prices as interest rates fluctuate? Have home prices recovered since rates have...
What happens to home prices as interest rates fluctuate? Have home prices recovered since rates have fallen since then to record lows in late 2010 and beyond?
Since interest rates have dropped, you consider refinancing your mortgage at a lower 6% rate. If...
Since interest rates have dropped, you consider refinancing your mortgage at a lower 6% rate. If you took out a new 30 year mortgage at 6% for your remaining loan balance your new monthly payments would be $675.58. House was $140,000 paying10% as down payment (14000) and 9% interest for the next 30 years a. how much interest will you pay over the life of the new loan? b. notice that if you refinance your house you are going to...
In recent times, with mortgage rates at low levels, financial institutions have had to provide more...
In recent times, with mortgage rates at low levels, financial institutions have had to provide more customer convenience. One of the innovations offered by Coastal National Bank and Trust is online entry of mortgage applications. Listed below are the times, in minutes, for eight customers to complete the application process for a 15-year fixed-rate mortgage and the times for nine customers to complete an application for a 30-year fixed-rate mortgage. 15 years, fixed rate 41 36 42 39 36 48...
Correlation To determine how the number of housing starts is affected by mortgage rates an economist...
Correlation To determine how the number of housing starts is affected by mortgage rates an economist recorded the average mortgage rate and the number of housing starts in a large country for the past 10 years. These data are listed here. Rate Starts year #1 8.5 115 year #2 7.8 111 year #3 7.6 185 year #4 7.5 201 year #5 8 206 year #6 8.4 167 year #7 8.8 155 year #8 8.9 117 year #9 8.5 133 year...
Explain how such factors as home value, down payments, mortgage types, and interest rates affect the...
Explain how such factors as home value, down payments, mortgage types, and interest rates affect the total monthly mortgage payment. Explain if any of these factors surprise you and the reasons why. What strategies could you take to pay the least amount for a house (or healthcare facility) over the life of the loan?
In recent years, due to low interest rates, many homeowners refinanced their home mortgages. Below is...
In recent years, due to low interest rates, many homeowners refinanced their home mortgages. Below is the amount refinanced for 20 loans processed last week. The data are reported in thousands of pounds and arranged from smallest to largest. 59.2    59.5 61.6    65.5    66.6 72.9    74.8    77.3 79.2    83.7    85.6    85.8    86.6    87.0    87.1 90.2    93.3 98.6    100.2    100.7 Question: What is the 26th percentile? (use...
1. In recent years, due to low interest rates, many homeowners refinanced their home mortgages. Linda...
1. In recent years, due to low interest rates, many homeowners refinanced their home mortgages. Linda is mortgage officer at the bank. Below are the amounts refinanced for 20 loans for the last month per $ 1,000's. 34, 60, 61, 66, 66, 73, 75, 77, 79, 83, 85, 86, 87, 87, 90, 93, 93, 100, 125, 130 a) Find the mea, median, 1st quartile, 3rd quartile, and the IQR of the data. ( IQR = 3rd - 1st quartiles )...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT