A) Plot a Scatter Diagram.

Scatter Plot
140

120

100 f(x) = 1.77x - 43.32

R = 0.92
80

Y
60

40

20

0
55 60 65 70 75 80 85 90

Table:2.1 Selling Price(y) VS Assessed Value(X).

B) Assuming a linear relationship, use the least squares method to
find the regression coefficients.
The regression coefficient of the equation y = 1.769x - 43.316 are
b0: -43.316
b1: 1.7690
R = 0.9187
In this simple regression model, selling price is the dependent variable and the
assessed value is an independent variable. Here, b 0 is the value of Y or selling
price when assessed value(x) is zero. b 1 is the slope of the equation that
determines the rate of change in the dependent variable Y as the independent
variable X changes.(See Appendix-Figure-2.1)
C) Interpret the meaning of the intercept and slope of the regression
line.
Intercept (b0): Coefficie Intercept, -43.3162 is the
value of selling price nts (dependent variable) when
the assessed value Intercept: b0 -43.3162 (independent variable) is 0.
The predicted value Slope:b1 1.7690 of selling price (000s) will
be at -43.3162.
Slope (b1): Slope, 1.7690, states that for every thousand-dollar increase in the
assessed price, the selling price increases by $1,769. It is the rate of change in
the dependent variable Y in response to change in the independent
variable X.

D) Use the regression model developed to predict the average selling

price for a house whose assessed value is $70,000.
Average selling price for a house assessed value of $70,000 would be around
$80,514
Y=b0+b1(70)
Y= -43.3162 + 1.7690 (70) = 80.514
E) What is the standard error of the estimate?
In the ANOVA table shown in the Appendix,figure-2.2 the squared
standard error was found
SSE = 369.62
Observations(n)=30
SSE 369.62
yx n2 30 2
Therefore, Standard error of the estimate (S )= = = 3.6333
F) What is the coefficient of determination?

As shown in the Appendix Figure 2.2:

SSR = 4175.15505
SST = 4544.77508
SSR 4175.15505
SST 4544.77508
Therefore, coefficient of determination (R2) = = =
0.918671

R2 or R Square from Appendix Figure 2.1 Coefficient of

determination is 0.9187

Regression Statistics
0.958
Multiple R 5
0.918
R Square 7
Adjusted R 0.915
Square 8
3.633
Standard Error 3
Observations 30
Table-2.2 Regression Statistics

G) What is Correlation coefficient?

As shown in Appendix-Figure 2.1 Calculated through Phstat,
 R2 0.918671436295852
Correlation coefficient (R) = = = 0.958473
Or Multiple R from Appendix Figure 2.1 Correlation coefficient is
0.9585
A correlation coefficient is a statistical measure of the degree to which changes
to the value of one variable predict change to the value of another. In positively
correlated variables, the value increases or decreases in tandem. In negatively
correlated variables, the value of one increases as the value of the other
decreases. Here in our case the Correlation coefficient is positive meaning that
the value of one increases as the value of the other increases and vice versa.

H) Perform a residual analysis on your results and determine the

adequacy of the fit of the model.

Residual Plot
10

Residuals 0

-5

-10 55 60 65 70 75 80 85 90

Table 2.3-Assessed value($000) Vs. residual

it is clear that there is no apparent pattern; hence, the linear model is
appropriate.
I. At the 0.05 level of significance is there evidence of a linear relationship
between selling price and assessed value? How do you know?

We are testing H0 : b1 = 0 vs. H1 : b1 0

Test statistic: t = 17.78433 (Appendix Figure 2.3)
P-value: 8.61 * 10-17 or 0.00000 < 0.05

Since, p-value < 0.05 level of significance; we Reject H 0. Hence, there is an

evidence of a significant relationship.

J. Set up a 95% confidence interval estimate of the average selling

price for houses with an assessed value of $70,000.

As derived from the PH Stat, it is 95% certain that the selling price is
between $109,540 and $138034.4 for houses, when the assessed value is
at $70,000
 For Average Y
14247.
Interval Half Width 22
Confidence Interval Lower 10954
Limit 0
Confidence Interval Upper 13803
Limit 4.4
Table 2.4. Confidence Interval for Average Y

K. Set up a 95% prediction interval estimate of the selling price of an

individual house with an assessed value of $70,000.

Referring to table 2.5, derived from the PH Stat the selling price is
between $109,540 and $138034.4 at 95% confidence level for the houses,
when the assessed value is at $70,000

For Individual Response Y

14247.218
Interval Half Width 8
Prediction Interval Lower 109539.9
Limit 748
Prediction Interval Upper 138034.4
Limit 123
Table 2.5. Confidence Interval for Individual Response Y

(Detailed PH Stat Confidence Interval is attached as Figure 2.5)

L. Set up a 95% confidence interval of the population slope. What

does this confidence interval mean?
95% confidence interval of the population slope means that at 95%
confidence level, true population slope is in between $1,565.25 and
$1,972.76. In other words, there is a 95% certainty that the population
slope ranges between $1,565.25 and $1,972.76. (See Appendix-Figure 2.3
or partial table # 7)

Coefficient Standard Upper Lower Upper

s Error t Stat P-value Lower 95% 95% 95.0% 95.0%
4.67E-
Intercept -43.3162 7.661566 -5.6537 06 -59.0102 -27.6222 -59.0102 -27.6222
17.7843 8.61E-
Assessed Value ($000) 1.769007 0.09947 3 17 1.565252 1.972762 1.565252 1.972762
Table 2.7. Partial Table
Appendix
Figure 2.1

Regression Statistics
0.958
Multiple R 5
0.918
R Square 7
Adjusted R 0.915
Square 8
3.633
Standard Error 3
Observations 30

Figure 2.2

ANOVA
Significa
df SS MS F
nce F
4175.15 316.28
Regression 1 4175.1551 51 25 0.0000
Residual 28 369.6200 13.2007
Total 29 4544.7751

Standa P-
Coefficie Lower Upper Lower Upper
rd t Stat valu
nts 95% 95% 95% 95%
Error e
- - - -
- 0.000 59.010 27.622 59.010 27.6221
Intercept -43.3162 7.6616 5.6537 0 2 2 2 8
Assessed 1.7690 0.0995 17.784 0.000 1.5653 1.9728 1.5653 1.97276
Value 3 0
 ($000)
Figure 2.3

Figure 2.4

Calculations
-
43.316
b1, b0 Coefficients 1.7690 2
b1, b0 Standard Error 0.0995 7.6616
R Square, Standard
Error 0.9187 3.6333
316.282 28.000
F, Residual df 5 0
Regression SS, 4175.15 369.62
Residual SS 51 00

Confidence level 95%

t Critical Value 2.0484
Half Width b0 15.6940
Half Width b1 0.2038

Figure 2.5
Confidence Interval
Estimate

Data
X Value 70000
Confidence Level 95%

Intermediate Calculations
Sample Size 30
Degrees of Freedom 28
2.048407
t Value 142
76.73466
XBar, Sample Mean of X 667
Sum of Squared Differences 1334.176
from XBar 747
3.633278
Standard Error of the Estimate 869
3664629.
h Statistic 212
 123787.1
Predicted Y (YHat) 935

For Average Y
14247.21
Interval Half Width 68
Confidence Interval Lower 109539.
Limit 9767
Confidence Interval Upper 138034.
Limit 4104

For Individual Response Y

14247.21
Interval Half Width 88
Prediction Interval Lower 109539.
Limit 9748
Prediction Interval Upper 138034.
Limit 4123