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Prediction of Rental Costs

An agent for a real estate company would like to be able to predict the monthly rental cost for apartments, based on the size of the apartments, as defined by the square footage. A random sample of 25 apartments revealed the following:

Apartment Monthly Rent ($) Size (Square Feet)

1 950 850
2 1,600 1,450
3 1,200 1.085
4 1,500 1,232
5 950 718
6 1,700 1,485
7 1,650 1,136
8 935 726
9 875 700
10 1,150 956
11 1,400 1,100
12 1,650 1,285
13 2,300 1,985
14 1,800 1,369
15 1,400 1,175
16 1,450 1,225
17 1,100 1,245
18 1,700 1,259
19 1,200 1,150
20 1,150 896
21 1,600 1,361
22 1,650 1,040
23 1,200 755
24 800 1,000
25 1,750 1,200

a) Construct a scatter plot.
b) Use the least-squares method (software) to find the regression coefficients bo and b1.
c) Interpret the meaning (in plain language, relative to this problem) of bo and b1 in this problem.
d) Predict the mean monthly rent for an apartment that has 1,000 square feet.
e) Why would it not be appropriate to use this model to predict the monthly rent
for apartments that have 500 square feet?

Solution Summary

The solution examines the predictions of rental costs for apartments based on the size.

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