Hiomework 3 - Douglas Silber 4-16 Steve Caples, a real...

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Douglas Silber 4-16 Steve Caples, a real estate appraiser in Lake Charles, Louisiana, has developed a regression model to help appraise residential housing in the Lake Charles area. The model was developed using recently sold homes in a particular neighborhood. The price (Y) of the house is based on the square footage (X ) of the house. The model is ˆ Y = 13,473 + 37.65X The coefficient of correlation for the model is 0.63. (a) Use the model to predict the selling price of a house that is 1,860 square feet. ^Y = 13,473 + 37.65(1,860) = 13,473 + 70,029 = $83,502 (b) A house with 1,860 square feet recently sold for $95,000. Explain why this is not what the model predicted. The model predicts the average selling price for this size house. Other variables were not taken into account in the regression model that may raise or lower the price a buyer is willing to pay for the same size house. (c) If you were going to use multiple regression to develop an appraisal model, what other
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Hiomework 3 - Douglas Silber 4-16 Steve Caples, a real...

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