a) Does there appear to be a positive, negative, or no relationship? How can you

Question

a) Does there appear to be a positive, negative, or no relationship? How can you tell?

b) Is there any evidence of a non-linear relationship? Why or why not, and what effect will this have on the correlation coefficient (in other words, why does this matter)?

c) Is there any evidence of issues such as heteroscedasticity or outliers? Why or why not, and what effect will they likely have if they're there?

d) Roughly, what range would you expect r2 to be in? Why? (You should explain what r2 is on at least your first answer).

e) Given all of your answers above, how accurate would you expect to be in predicting future ? scores based on X (i.e., would you expect the Standard Error of Estimation to be high, low, or moderate)? If you have said that there is no relationship, what would the Standard Error of Estimation be equal to (don't need to calculate a value here - recall that there is an upper limit to the SEoE).

Explanation / Answer

a) There is a negative relationship between Age of car and Value of car.

b) No, the relationship between Age of car and Value of car is not non-linear but it is linear in negative direction. As the Age of car increases the Value of car decreases.

c) The variation across the range of values of Age of car seems to be same as the variation across the range of values of Value of car, therefore, heteroscedasticity is not a problem in this case. If heteroscedasticity is present then the residuals vary across the values of the independent variable.

d) The range of r2 is expected to be from 0.75 to 0.90.

e) We will be highly accurate in predicting future scores based on X because the standard error of estimation would be low.

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