Show all work, calculations, and formulas and be sure to include all the calcula

Question

Show all work, calculations, and formulas and be sure to include all the calculations/steps needed to calculate the means, standard deviations, correlation coefficient, slope, y-intercept, and the coefficient of determination. Round to three decimal places.

There are many determinants that can be used to estimate a home’s value. Another resent study conducted a multivariate regression model observing the following home characteristics:

X1 = Acreage

X2 = Number of Stories

X3 = Area in square footage

X4 = Exterior Condition (equals 1 if in good condition, 0 if in poor condition)

X5 = Number of Full Baths

X6 = Number of Half Baths

X7 = Garage (equals 1 if there is a garage, 0 if there isn’t a garage)

The following regression model was built:

Y =-101097+21512X_1+38141X_2+72.3X_3+18580X_4+12218X_5+14569X_6+23999X_7

What is the value added to a home that has a garage? You are about to sell your home. It sits on 2 acres, is 2 stories tall, 2800 square feet, the exterior is in good condition, it contains two full baths and one half bath and has a garage. What could you expect to sell your house for?

Explanation / Answer

The coefficient of garage is 23999 so $23999 should be added to a home that has a garage.

Now,

X_1 = 2, X_2 = 2, X_3 = 2800, X_4 = 1, X_5 = 2, X_6 = 1, X_7 = 1

Y =-101097+21512(2)+38141(2)+72.3(2800)+18580(1)+12218(2)+14569(1)+23999(1)

y = 302233

So,

For the given specifications, the house price expected to be is $302233

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