TABLE 14-6 One of the Most Common Questions of Prospective House Buyers

question 208

Multiple Choice

TABLE 14-6
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 4 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit (X₁) the amount of insulation in inches (X₂) , the number of windows in the house (X₃) , and the age of the furnace in years (X₄) . Given below are the Excel outputs of two regression models.
Model 1

Model 2

-Referring to Table 14-6, what can we say about Model 1?

• A) The model explains 77.7% of the sample variability of heating costs; after correcting for the degrees of freedom, the model explains 75.1% of the sample variability of heating costs.
• B) The model explains 75.1% of the sample variability of heating costs; after correcting for the degrees of freedom, the model explains 77.7% of the sample variability of heating costs.
• C) The model explains 80.8% of the sample variability of heating costs; after correcting for the degrees of freedom, the model explains 75.7% of the sample variability of heating costs.
• D) The model explains 75.7% of the sample variability of heating costs; after correcting for the degrees of freedom, the model explains 80.8% of the sample variability of heating costs.

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Definitions:

Standard Normal Distribution

A probability distribution that has a mean of zero and a standard deviation of one, commonly represented in statistics.

Less Than

A mathematical comparison indicating that one value is smaller than another.

Z-scores

Scores that are normalized to show the number of standard deviations a data point is away from the average.

Standard Normal Distribution

A Gaussian distribution where the mean is zero and the standard deviation is one.