# Statistics - Correlation & Regression

The owner of Maumee Ford-Mercury wants to study the relationship between the age of a car and its selling price. Listed below is a random sample of 12 used cars sold at Maumee Motors during the last year.

Age (Years) SELLING PRICE ($000)

9 8.10

7 6.00

11 3.60

12 4.00

8 5.00

7 10.00

8 7.60

11 8.00

10 8.00

12 6.00

6 8.60

6 8.00

a. If we want to estimate selling price based on the age of the car, which variable is the dependent variable and which is the independent variable?

b. Draw a scatter diagram. [First, enter age and selling price data in Excel. Use Megastat Excel, correlation/regression, scatterplot function or use Excel, Tools, Data Analysis, Regression function].

c. Determine the coefficient of correlation (r). Interpret the result. [use Megastat Excel, correlation/regression, correlation matrix].

d. Determine the coefficient of determination (r2). Interpret the result.

e. Using regression coefficients table or scatterplot, write the simple linear regression equation that represents the relationship between age of car and its selling price.

f. Based on the regression equation, what will be the values of cars owned for the next 10 years?

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#### Solution Summary

A complete, neat and step-by-step solution is provided in the attached Excel file, including the scatter graph and calculations.