A. Predict the average monthly rent for an apartment located in the town center
ID: 2946894 • Letter: A
Question
A. Predict the average monthly rent for an apartment located in the town center that has 1500 square feet
B. Predict the average monthly rent for an apartment located in the suburbs that has 1500 square feet.
real estate agent wishes to estimate the monthly et an following model: al for apartments based on the size (square feet) the location of the apartments. She chose the where: x1 = Square footage of the apartment 1 if located in town center 2 0 if not located in town center This linear regression modei was fitted to a sample of size 50 to produce the following regression equation: y 145 1.2x 300x2 a. Predict the average monthly rent for an apartment located in the town center that has 1,500 square feet. b. Predict the average monthly rent for an apartment ocated in the suburbs that has 1,500 square feet. terpret b2 in the context of this exercise.
Explanation / Answer
SolutionA:
we have y^=145+1.2x1+300x2
we have x1=1500
x2=1 located in town center
substitute this in regression eq we get
y^=145+1.2*1500+300*1
y hat=2245
predicted avergae monthly rent=2245
Solutionb:
we have x1=1500
x2=0 located in sub urban
substitute this in Regression eq
y^=145+1.2*1500+300*0
=1945
predicted avergae monthly rent=1945
Solutionc:
coefficient of b2=300
predicted rent increases by 300 holding square footage constant if located in town center