What Is the Relationship Between Diamond Price and Carat Size

question 40

Multiple Choice

What is the relationship between diamond price and carat size? 307 diamonds were sampled and a straight-line relationship was hypothesized between y = diamond price (in dollars) and x = size of the diamond (in carats) . The simple linear regression for the analysis is shown below: Least Squares Linear Regression of PRICE The model was then used to create 95% confidence and prediction intervals for y and for E(Y) when the carat size of the diamond was 1 carat. The results are shown here: 95% confidence interval for E(Y) : ($9091.60, $9509.40) 95% prediction interval for Y: ($7091.50, $11,510.00) Which of the following interpretations is correct if you want to use the model to determine the price of a single 1-carat diamond?

• A) We are 95% confident that the price of a 1-carat diamond will fall between $7091.50 and $11,510.00.
• B) We are 95% confident that the average price of all 1-carat diamonds will fall between $7091.50 and $11,510.00.
• C) We are 95% confident that the price of a 1-carat diamond will fall between $9091.60 and $9509.40.
• D) We are 95% confident that the average price of all 1-carat diamonds will fall between $9091.60 and $9509.40.

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Definitions:

Cash Inflow

Money or equivalent value received by a business during a specific period, including revenues from sales, financing, and investment activities.

Financing Activities

Cash flow activities that include (a) obtaining cash from issuing debt and repaying the amounts borrowed and (b) obtaining cash from stockholders, repurchasing shares, and paying dividends.

Investing Activities

Financial transactions related to acquiring or selling investments and long-term assets, detailed in a company's cash flow statement.

Cash

Cash refers to the amount of currency a business or individual has on hand, including money in bank accounts and liquid securities.