SCENARIO 18-2 One of the Most Common Questions of Prospective

question 125

Multiple Choice

SCENARIO 18-2 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 ( ) , the amount of insulation in inches ( ) , the number of windows in the house ( ) , and the age of the furnace in years ( ) .Given below are the EXCEL outputs of two regression models.
-Referring to Scenario 18-2, 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:

Effective Rate

The effective rate is the actual interest rate on an investment or loan, taking into account the compounding of interest, as opposed to the nominal or stated rate.

Compounding Interval

The frequency at which interest is added to the principal of a deposit or loan, influencing the total interest earned or paid.

Compounded Quarterly

The process of calculating interest on both the initial principal and the accumulated interest over three-month intervals.

Interest Rate

The percentage at which interest is calculated on the principal of a loan or deposit over a specific period of time.