SCENARIO 18-2 One of the Most Common Questions of Prospective House Buyers

question 101

Multiple Choice

SCENARIO 18-2
One of the most common questions of prospective house buyers pertains to the cost of heating in dollars (Y) . To provide its customers with information on that matter, a large real estate firm used the following 4 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit ( X₁ ) , the amount of insulation in inches ( X ₂ ) , the number of windows in the house ( X₃ ) , and the age of the furnace in years ( X ₄ ) . Given below are the EXCEL outputs of two regression models.


-Referring to Scenario 18-1,one individual in the sample had an annual income of $100,000,a family size of 10,and an education of 16 years.This individual owned a home with an area of 7,000 square feet (House = 70.00) .What is the residual (in hundreds of square feet) for this data point?

• A)7.40
• B)2.52
• C)- 2.52
• D)- 5.40

---

Definitions:

Standard Deviation

A statistic that measures the dispersion or variability of a dataset relative to its mean.

Central Limit Theorem

A statistical theory stating that the sampling distribution of the sample mean of any independent, random variable will approximate a normal distribution, given a sufficiently large sample size.

Sampling Distribution

A sampling distribution is a probability distribution of a statistic obtained through a large number of samples drawn from a specific population, used to infer properties of the population.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, showing how much each value in the set varies from the mean.