MODEL 2: Assume the variable SPORT is-1 if type of vehicle is sport utility, and

Question

MODEL 2: Assume the variable SPORT is-1 if type of vehicle is sport utility, and-0 otherwise. A regression is estimated using Suggested-price and SPORT a. (2pt) Comment on the goodness of fit for MODEL 2. MODEL2- Sum Adjusted R Std. Error of the re 794* 631 588 4.298 a. Predictors: (Constant), SuggestedPrice, Sport b. Dependent Variable: ResaleValue MODEL 2-Coefficients Unstandardized Standardized b. (lpt)Write down the estimated regression equation for MODEL 2 B Std. Error Model Constant) Beta 42.554 11.947 70 1.897 567 3.660 .000 069 001 3.562 917 163 c. (4pt) Report the statistical significance of the coefficients. d. (6pt) Interpret the intercept for MODEL 2

Explanation / Answer

a) Since R2 = 0.631 = 63.1% , so 63.1% amount of variation in Resale value can be explained by the regression model using predictors as Suggested price and Sport.

b) The estimated regression equation for model 2 :

Resale value = 42.554 + 7.917*Sport

c) P-value for Suggested price = 0.069 > 0.05, so we fail to reject H0 at 5% level of significance and we can conclude that the coefficient of Suggested price is not significantly different from 0 i.e Suggested price is not a signficant predictor.

P-value for Sport = 0.001 < 0.05, so we reject H0 at 5% level of significance and we can conclude that the coefficient of Sport is significantly different from 0 i.e Sport is a signficant predictor.

d) Interpretation of intercept :

When Suggested price = 0 and Sport = 0 then we can say the predicted value of Resale value = 42.554

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