Determine When a Linear Model Is Appropriate for Data

question 16

Multiple Choice

Determine when a linear model is appropriate for data.
-Monthly closing stock prices for a utility company were obtained from January 2007
Through August 2008. A regression model was estimated to describe the trend in closing
Stock prices over time. What does the plot of residuals below suggest?

• A) An outlier is present in the data set.
• B) The linearity condition is not satisfied.
• C) A high leverage point is present in the data set.
• D) The data are not normal.
• E) The equal spread condition is not satisfied.

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