Ch16 Essay

1260 Words Feb 24th, 2014 6 Pages
Chapter 16

7. In 2011, home prices and mortgage rates fell so far that in a number of cities the monthly cost of owning a home was less expensive than renting. The following data show the average asking rent and the monthly mortgage on the median-priced home (including taxes and insurance) for 10 cities where the average monthly mortgage payment was less than the average asking rent (The Wall Street Journal, November 26-27, 2011).

a. Develop a scatter diagram for these data, treating the average asking rent as the independent variable. Does a simple linear regression model appear to be appropriate?
The below scatter diagram shows a possible curvilinear relationship between the average asking rent and the monthly mortgage on the
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31. A study investigated the relationship between audit delay (Delay), the length of time from a company’s fiscal year-end to the date of the auditor’s report, and variables that describe the client and the auditor. Some of the independent variables that were included in this study follow.

Industry A dummy variable coded 1 if the firm was an industrial company or 0 if the firm was a bank, savings and loan, or insurance company.
Public A dummy variable coded 1 if the company was traded on an organized exchange or over the counter; otherwise coded 0.
Quality A measure of overall quality of internal controls, as judged by the auditor, on a five-point scale ranging from “virtually none” (1) to “excellent” (5).
Finished A measure ranging from 1 to 4, as judged by the auditor, where 1 indicates “all work performed subsequent to year-end” and 4 indicates “most work performed prior to year-end.”

a. Develop the estimated regression equation using all of the independent variables.
The regression equation is
Delay = 80.4 + 11.9 Industry - 4.82 Public - 2.62 Quality - 4.07 Finished

Predictor Coef SE Coef T P
Constant 80.429 5.916 13.60 0.000
Industry 11.944 3.798 3.15 0.003
Public -4.816 4.229 -1.14 0.263
Quality -2.624 1.184 -2.22 0.033
Finished -4.073 1.851 -2.20 0.035

S = 10.9235 R-Sq = 38.3% R-Sq(adj) = 31.2%
Analysis of Variance
Source DF SS

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