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

question 249

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 is your decision and conclusion for the test H₀: β₂ = 0 vs H₁: β₂ < 0 at the α = 0.01 level of significance using Model 1?

• A) Do not reject H₀ and conclude that the amount of insulation has a linear effect on heating cots.
• B) Reject H₀ and conclude that the amount of insulation does not have a linear effect on heating costs.
• C) Reject H₀ and conclude that the amount of insulation has a negative linear effect on heating costs.
• D) Do not reject H₀ and conclude that the amount of insulation has a negative linear effect on heating costs.

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