# Coefficient of correlation and coefficient of determination

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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

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Coefficient of correlation and coefficient of determination

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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). ...

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