Instruction 16-3
in Hawaii,condemnation Proceedings Are Under Way to Enable

question 25

Multiple Choice

Instruction 16-3
In Hawaii,condemnation proceedings are under way to enable private citizens to own the property upon which their homes are built.Until recently,only estates were permitted to own land,and homeowners leased the land from the estate.In order to comply with the new law,a large Hawaiian estate wants to use regression analysis to estimate the fair market value of the land.The following model was fit to data collected for n = 20 properties,10 of which are located near a
cove.Model 1: Y = β 0 + β 1X1 + β 2X2 + β 3X1X2 + β 4+ β 5X2 + ε where
Y = Sale price of property in thousands of dollars
X1 = Size of property in thousands of square metres
X2 = 1 if property located near cove,0 if not
Using the data collected for the 20 properties,the following partial output obtained from Microsoft Excel is shown:
$\begin{array}{|l|l|l|l|l|l|}\hline \text { SUMMARY } & \text { OUTPUT } & \\\hline \text { Regression } & \text { Statistics } & \\\hline \text { Multiple R } & & 0.985 \\\hline \text { R Square } & & 0.970 \\\hline \text { Std. Error } & & 9.5 \\\hline \text { Observations } & & 20 \\\hline\\\hline\text { ANOVA }\\\hline & d f & \text { SS } & \text { MS } & F & \text { Signif F } \\\hline \text { Regression } & 5 & 28324 & 5664 & 62.2 & 0.0001 \\\hline \text { Residual } & 14 & 1279 & 91 & & \\\hline \text { Total } & 19 & 29603 & & & \\\hline\\\hline&\text {Coeff }&\text {StdError }&\text {t stat }&\text { P-Value}\\\hline \text { Intercept } & -32.1 & 35.7 & -0.90 & 0.3834 \\\hline \text { Size } & 12.2 & 5.9 & 2.05 & 0.0594 \\\hline \text { Cove } & -104.3 & 53.5 & -1.95 & 0.0715 \\\hline \text { Size }{ }^{*} \text { Cove } & 17.0 & 8.5 & 1.99 & 0.0661 \\\hline \text { SizeSq } & -0.3 & 0.2 & -1.28 & 0.2204 \\\hline \text { SizeSq } & -0.3 & 0.3 & -1.13 & 0.2749 \\\hline \end{array}$ Note: Std.Error = Standard Error
-Referring to Instruction 16-3,is the overall model statistically adequate at a 0.05 level of significance for predicting sale price (Y) ?

• A)Yes,since the p-value for the test is smaller than 0.05.
• B)No,since some of the t tests for the individual variables are not significant.
• C)No,since the standard deviation of the model is fairly large.
• D)Yes,since none of the ?-estimates are equal to 0.

---

Definitions:

Transfer of Shares

The process by which ownership of a company's stock is moved from one party to another.

Par Value

The nominal or face value of a bond, share of stock, or other financial instrument as stated by the issuer.

Treasury Shares

Shares that were issued and subsequently reacquired by the issuing corporation, not considered when calculating earnings per share or dividends.

Issued

The process of distributing something, such as a publication, a financial instrument, or an official document, to the public or to a specific group.