Purchase Solution

# Coefficient of correlation and coefficient of determination

Not what you're looking for?

Steve Caples, a real estate appraiser in lake Charles Louisiana, has developed a regression model to help appraise residential housing in the Lake Charles Area. This model was developed using recently sold homes in a particular neighborhood. The price (Y) of the house is based on the square footage (X) of the house.
The model is
Y = 13,473 + 37.65X
The coefficient of correlation for the model is 0.63
A.Using the model to predict the selling price of a house that is 18,860 square feet
B.A house with 18,60 square feet recently sold for \$95,000. Explain why this is not what the model predicted.
C.What is the coefficient of determination for this model

##### Solution Summary

Coefficient of correlation and coefficient of determination

##### Solution Preview

Based on the model, if a house is 18860 sq. ft, it should sell for Y = 13,473 + 37.65(18860) = 723,552

If a house is 1860 sq ft., the model would predict that it is worth Y = 13,473 + 37.65(1886) = 84,480.9
This is a little different from the actual price (95000). ...

##### Terms and Definitions for Statistics

This quiz covers basic terms and definitions of statistics.