Multiple regression analysis is used to predict home prices based on the followi

Question

Multiple regression analysis is used to predict home prices based on the following regression equation: Home Price (in dollars) = 234, 767 + X_1 (15, 056) + X_2 (-106, 748) + X_3 (-26, 726) X_1 is defined as 100s of square feet in the home. For example, if the home has 1, 200 square feet, X_1 would be 12. X_2 and X_3 are dummy variables based on the zip code of the house and are defined as follows: Use these values to determine the predicted price of a 2,000 square foot home in the 98029 zip code. What is the home's predicted price in dollars?

Explanation / Answer

Home price (in dollars) = 243767 + X1(15,056) + X2(-106748) + X3(-26726)

X1 = 20

X2 = 1

X3 = 0

Home price (in dollars) = 243767 + 20*(15,056) + 1*(-106748) + 0*(-26726) = $438,139

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