Suppose You Have the Following Regression Results from a Regression

question 29

Multiple Choice

Suppose you have the following regression results from a regression of home prices on house attributes for a random sample of house transactions: $$\begin{array} { | l | r | r | } \hline & \text { Coefficierts } & \text { Stardard Error } \\\hline \text { Iratercept } & 16310.0 & 4114.5 \\\hline \text { Nurrber of Bedroorrs } & 7295.3 & 1399 . \\\hline \text { Number of Bathroorrs } & 23473.0 & 4032.0 \\\hline\end{array}$$ r-squared = 0.302 Adjusted r-squared = 0.299 If we assume that the proper model to predict the market value of houses is given by this regression, and thus we are getting unbiased estimates of the true relationships between number of bedrooms/bathrooms and sales price, what is the effect on sales price of increasing the number of bathrooms in a house by one, holding number of bedrooms fixed?

• A) Approximately, $16,310 dollars.
• B) Approximately, $ 7,295 + 23,473 = $30,768.
• C) Approximately, $23,473.
• D) Approximately, an increase of 30%.

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Definitions:

Depreciable Cost

The total cost of an asset that is subject to depreciation, which includes the purchase price minus any salvage value.

Useful Life

The estimated period of time over which a fixed asset is expected to be usable by the business, influencing depreciation calculations.

Depreciation Expense

The allocated cost of using a fixed asset over its useful life, reflecting its decrease in value over time.

Straight-line Method

A method for calculating depreciation of an asset, which assumes the asset will lose an equal amount of value each year over its useful life.