(40 points) Jersey Shore Realtors would like to develop a regression model to he
ID: 3046903 • Letter: #
Question
(40 points) Jersey Shore Realtors would like to develop a regression model to help the firm set weekly rental rates for beach properties during the summer season in New Jersey. The independent riables for this model are: Size of the property in square feet The number of bedrooms The number of bathrooms Age of the house The number of blocks from the ocean Questions. Use the regression tables and graphs to analyze this model 1. (10 points) Which variables are significant in Model 1? Include your analysis of the hypothesis tests confidence intervals, and what it means for this model 2. (5 points) Do you see any issues with multicollinearity? Explain your analysis and results. 3. (5 points) Explain any issues with the residual plots. 4. (20 points) Which is the best model? a. Explain the variables that work best and why you would select that model for Jersey Shore Realtors. b. Do you have any concerns about choosing this model? c. Use the equation for the model you chose and predict the rental amount given the following actual data for three locations. If you choose Model 2 as your best choice, then just use the variables for that model. How close do you come to the actual rental amount? Explain your results and what you now think about our model Square Feet 1800 732,600 4500 1325 2,200 10500 21 15 3.600 Rental 4.5Explanation / Answer
1)
Looking at the p-value, Blocks, Bathrooms and Square Feet are significant in model 1.
2)
Bedrooms and square feet are higly correlated amongst themselves. Hence, model will not be able to predict as to which of the variables is actually having an impact on dependent variable.
3)
Residuals are high in 2nd and 3rd case.
4)
Model 1 is better because we would have 3 significant variables (with p-value less than 0.05)
a)
Looking at the p-value, Blocks, Bathrooms and Square Feet are significant in model 1 and should be selected.
b)
Yes, there are issues of multicollinearity and two insignificant variables.
c)
Rental=1075.6296-544.1297*bedrooms+55.2712*age-1275.6969*blocks+809.4527*bathrooms+1.7578*sqft
Int 1075.63 1075.6296 1075.6296 1075.6296 Bedrooms -544.1297 -2176.5188 -2176.5188 -3264.7782 Age 55.2712 386.8984 718.5256 1160.6952 Blocks -1275.697 -3827.0907 -3189.2423 -1913.5454 Bathrooms 809.4527 1618.9054 2428.3581 3642.53715 Sqft 1.7578 4570.28 3867.16 6328.08 Predicted 1648.1039 2723.91225 7028.6184 Actual 1800 4500 10500 Residual 151.8961 1776.08775 3471.3816Related Questions
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