SCENARIO 13-6
One of the Most Common Questions of Prospective

question 147

Short Answer

SCENARIO 13-6
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 2 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit ( X1 ) and the amount of insulation in inches ( X 2 ).Given below is EXCEL output of the regression model. $$\begin{array}{l}\begin{array} { l r } \hline { \text { Regression Statistics } } \\\hline \text { Multiple R } & 0.5270 \\\text { R Square } & 0.2778 \\\text { Adjusted R Square } & 0.1928 \\\text { Standard Error } & 40.9107 \\\text { Observations } & 20 \\\hline\end{array}\\\end{array}$$
$\begin{array}{lrrrrr}\text { ANOVA }\\\hline&\text { df } & \text { SS } & \text { MS } & F & \text { Significance F }\\\hline\text { Regression } & 2 & 10943.0190 & 5471.5095 & 3.2691 & 0.0629 \\\text { Residual } & 17 & 28452.6027 & 1673.6825 & & \\\text { Total } & 19 & 39395.6218 & & &\end{array}$ 13-22 Multiple Regression $$\begin{array}{l}\begin{array} { l r r r r r r } \hline & \text { Coefficients } &{ \text { Standard Error } } & { \text { t Stat } } & \text { P-volue } & \text { Lower 95\% } & \text { Upper 95\% } \\\hline \text { Intercept } & 448.2925 & 90.7853 & 4.9379 & 0.0001 & 256.7522 & 639.8328 \\\text { Temperature } & - 2.7621 & 1.2371 & - 2.2327 & 0.0393 & - 5.3721 & - 0.1520 \\\text { Insulation } & - 15.9408 & 10.0638 & - 1.5840 & 0.1316 & - 37.1736 & 5.2919 \\\hline\end{array}\\\text { Also } \operatorname { SSR } \left( X _ { 1 } \mid X _ { 2 } \right) = 8343.3572 \text { and } \operatorname { SSR } \left( X _ { 2 } \mid X _ { 1 } \right) = 4199.2672\end{array}$$
-Referring to SCENARIO 13-6, the value of the partial F test statistic is forH0: Variable X1 does not significantly improve the model after variable X2 has been includedH1: Variable X1 significantly improves the model after variable X2 has been included

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Definitions:

Involuntary Bankruptcy

A legal process initiated by creditors seeking to have a debtor declared bankrupt by a court, forcing the debtor to liquidate or reorganize their debts.

Bankruptcy Proceedings

The legal process through which individuals or entities unable to meet their financial obligations can seek relief from some or all of their debts.

Fair Market Value

The price that property would sell for on the open market, between a willing buyer and a willing seller.

Forced into Bankruptcy

A situation where an individual or company is legally compelled into declaring bankruptcy by creditors or legal action, often due to inability to pay outstanding debts.