Assignment-2 Sta-217 (Section 3)

Submitted to:
Mili Roy Lecturer Department of Economics East West University

Submitted by:
Hasif Ahmed Khan 2007-2-10-131 Department of Business Administration East West University

Answer to the question no.1 a. Develop a 99 percent confidence interval for the mean selling price of homes.

One-Sample Statistics N Selling price in $'000 50 Mean 227.5520 Std. Deviation 46.23448 Std. Error Mean 6.53854

One-Sample Test Test Value = 0 99% Confidence Interval of the Difference t Selling price in $'000 34.802 df 49 Sig. (2-tailed) .000 Mean Difference Lower 227.55200 210.0290 Upper 245.0750

We know, confidence interval: CI x t Interpretation:

s n

(2034 .662 2354 .066 )

Probability that the selling prices of the homes will range from ($21002.9 $24507.5) is 0.99. The mean selling price of the homes ranges from $21002.9to $ 24507.5 and we are 99% confident about it. The interval ($21002.9, $24507.5) contains the population mean with probability 0.99. If we take a sample of Selling Price 100 times, this interval will contain the population 99 times.

b. Develop a 95 percent confidence interval for the mean distance of the homes from the center of the city.

One-Sample Statistics N Distance from the center of 50 city in miles Mean 14.5000 Std. Deviation 5.20302 Std. Error Mean .73582

One-Sample Test Test Value = 0 95% Confidence Interval of the Difference t Distance from the center of 19.706 city in miles df 49 Sig. (2-tailed) .000 Mean Difference Lower 14.50000 13.0213 Upper 15.9787

We know, the confidence interval: CI x t Interpretation:

s n

(13 .0213 15 .9787 )

Probability that the mean distance of the homes from the center of the city will range from (13.0213 15.9787) is 0.95 The mean distance of the homes from the center of the city ranges from 13.02 to 15.9787, and we are 99% confident about it. The interval (13.02 15.98) contains the population mean with probability 0.95. If we take a sample of distance of the homes 100 times, this interval will contain the population 95 times.

Answer to the question no.2 a. A recent article in the daily star indicated that the mean selling price of homes in the city of Dhaka is more than tk. 220. Can we conclude that the mean selling price of the homes in Dhaka City is more than 220? Use the 0.01 Significance level. What is the p-value? Step 1: Ho: 220 H1: > 220 Step 2: Level of significance is = 0.01 Step 3: t-test statistic will be used Step 4: Decision rule: If, P-value< value, Ho will be rejected. If, P-value > value, Ho will be accepted. Step 5:
One-Sample Statistics N Selling price in $'000 50 Mean 227.5520 Std. Deviation 46.23448 Std. Error Mean 6.53854

One-Sample Test Test Value = 220 99% Confidence Interval of the Difference t Selling price in $'000 1.155 df 49 Sig. (2-tailed) .254 Mean Difference Lower 7.55200 -9.9710 Upper 25.0750

Here, p value (one tailed) is .127. So, P-value > value. So, Ho will be accepted. So, at the 0.01 significance level, we cannot conclude that the mean selling price of the homes in Dhaka city is more than tk 220.

b. The same article reported the mean size was less than 210 square feet. Can we conclude that the mean size of homes sold in Dhaka city is less than 210 square feet? Use the 0.05 significance level. What is the P-value?

Step 1: Ho: 210 H1: < 210 Step 2: Level of significance is = 0.05 Step 3: t-test statistic will be used Step 4: Decision rule: If, P-value< value, Ho will be rejected. If, P-value > value, Ho will be accepted. Step 5:

One-Sample Statistics N Area of home in square feet 50 Mean 2220.0000 Std. Deviation 241.59335 Std. Error Mean 34.16646

One-Sample Test Test Value = 210 95% Confidence Interval of the Mean t Area of home in square 58.830 feet df 49 Sig. (2-tailed) .000 Difference 2010.00000 Difference Lower 1941.3399 Upper 2078.6601

Here, we can see that, p value (.000) is less than value, so Ho will be rejected and H1will be accepted. So, at the 0.05 significance level, we can conclude that the mean size of homes sold in Dhaka city is less than 210 square feet.

Answer to the question no-3 a. At the 0.05 significance level, can we conclude that there is a difference in the mean selling price of homes with a pool and homes without a pool? Here, Step 1: H0: 1 = 2 1 = Selling Price of homes with pool

H1: 1 2 2 = Selling Price of homes without pool Step 2: Level of significance, = 0.05 Step 3: t-Test statistic will be used. Step 4: Decision Rule- If P-value< - value, Ho will be rejected. P-value > - value, Ho will be accepted.

Step 5:
Group Statistics Pool Selling price in $'000 no yes N 18 32 Mean 207.4111 238.8813 Std. Deviation 28.72908 50.57844 Std. Error Mean 6.77151 8.94109

Independent Samples Test Levene's Test for Equality Variances of t-test for Equality of Means 95% Confidence Interval of the Difference Sig. (2- Mean F Selling price $'000 Equal in variances assumed Equal variances not assumed -2.806 47.978 .007 -31.47014 11.21590 -54.02149 -8.91879 6.756 Sig. .012 t df tailed) .019 Difference -31.47014 Std. Error Lower -57.59222 Upper -5.34806

Difference 12.99196

-2.422 48

There are 2 p-values in the table. To choose the correct one another hypothesis test is needed, Step 1: Ho: 1 = 2 H1: 12 Here, 1= with pool 2= without pool

Step 2: Significance level, = .05 Step 3: F- Test statistic will be used Step 4: If, P-value< - value, Ho will be rejected. P-value > - value, Ho will be accepted. Step 5: Decision (Comparing Variances): Since, P-value (.012) < -value (.05), H0 is rejected, and H1 is accepted. That is, 12 Equal variance not assumed.

Decision (Comparing Means): Since, P-value (.007) <-value (.05), Ho is rejected, and H1 is accepted. That is, 1 2 Interpretation: Yes, at the 0.05 significance level there is a significant difference in the mean selling price of homes with a pool, and homes without a pool.

b. At the 0.01 significance level, can we conclude that there is a difference in the mean selling price of homes with an attached garage and without an attached garage? Here, Step 1: H0: 1 = 2 1 = Selling Price of homes with attached garage

H1: 1 2 2 = Selling Price of homes without attached garage Step 2: Level of significance, = 0.01 Step 3: t-Test statistic will be used. Step 4: Decision Rule- If P-value< - value, Ho will be rejected. P-value > - value, Ho will be accepted.

Step 5:

Group Statistics Garage attached N Selling price in $'000 no yes 15 35 Mean 191.7200 242.9086 Std. Deviation 23.28648 45.25719 Std. Error Mean 6.01254 7.64986

Independent Samples Test Levene's Test for Equality Variances of t-test for Equality of Means 99% Interval Difference Sig. (2- Mean F Selling price Equal variances 6.358 in $'000 assumed Equal variances not assumed -5.261 46.182 .000 -51.18857 9.72991 -77.32853 -25.04861 Sig. .015 t df tailed) .000 Difference -51.18857 Std. Error Lower -84.39117 Upper -17.98597 Confidence of the

Difference 12.37885

-4.135 48

There are two p-values in the table. To choose the correct one another hypothesis test is needed, Step 1: Ho: 1 = 2 H1: 12 Here, 1= with attached garage 2= without attached garage

Step 2: Level of significance, = .01 Step 3: F- Test statistic will be used Step 4: If, P-value< - value, Ho will be rejected. P-value > - value, Ho will be accepted. Step 5: Decision (Comparing Variances): Since, P-value (.015) > -value (.01), H0 is accepted. That is, 1= 2 Equal variance is assumed.

Decision (Comparing Means): Since, P-value (.000) <-value (.01), Ho is Rejected. That is, 1 2.

Interpretation: Yes, at the 0.01 significance level there is a significant difference in the mean selling price of homes with attached garage, and homes without attached garage.

Answer to the question no.4 a. At the 0.01 significance level, is there a difference in the variability of the selling prices of the homes that have a pool versus those that do not have a pool? Step 1: Ho: 1 = 2 H1: 12 Step 2: Significance level, = .01 Step 3: F- test statistic will be used. Step 4: Decision Rule- If P-value < - value, Ho will be rejected. P-value > - value, Ho will be accepted. Here, 1= with pool 2= without pool

Step 5:
Group Statistics Pool Selling price in $'000 no yes N 18 32 Mean 207.4111 238.8813 Std. Deviation 28.72908 50.57844 Std. Error Mean 6.77151 8.94109

Independent Samples Test Levene's Test for Equality Variances of t-test for Equality of Means 95% Interval Difference Sig. (2- Mean F Selling price Equal in $'000 variances assumed Equal variances assumed not -2.806 47.978 .007 -31.47014 11.21590 -54.02149 -8.91879 6.756 Sig. .012 t df tailed) .019 Difference -31.47014 Std. Error Lower Upper Confidence of the

Difference 12.99196

-2.422 48

-57.59222 -5.34806

Here P-value (.012)> - value (0.01), Ho will be accepted. That is, 1 = 2. So, at the 0.01 significance level, we can conclude that, there is no difference in the variability of the selling prices of the homes that have a pool versus those that do not have a pool.

b. At the 0.05 significance level, is there a difference in the mean selling price of homes among the five townships? Here, we assume, 1= Gulshan 2= Banani 3= Dhanmondi 4= Baridhara 5= Uttara Step 1: Ho: 1=2=3=4=5 H1: At least one pair will differ. Significance Level, = 0.05 F- Test statistic will be used

Step 2: Step 3:

Step 4: Decision Rule: If P-value< - value, Ho will be rejected. P-value > - value, Ho will be accepted Step 5:

ANOVA Selling price in $'000 Sum of Squares df Between Groups Within Groups Total 18493.765 86249.960 104743.725 4 45 49 Mean Square 4623.441 1916.666 F 2.412 Sig. .063

Decision:Since, P-value (.063) > - value (.05) so, H0 is accepted and H1 is rejected. That is, 1=2=3=4=5. Interpretation: No, at the 0.05 significance level, there is no significant difference in the mean selling price of the homes among the five Townships. Answer to the question-5 a. Write out the regression equation including all the variables except township. Discuss the variables size of the homes in Square feet (X2), distance from the city (X4) and garage attached with the home (X6)

Coefficients

Standardized Unstandardized Coefficients Model 1 (Constant) Number of bedrooms Area of home in square feet Pool B 76.938 8.609 .044 23.281 Std. Error 56.607 3.396 .022 10.045 1.047 .296 .228 .244 -.181 Coefficients Beta t 1.359 2.535 2.021 2.318 -1.534 Sig. .181 .015 .050 .025 .132

Distance from the center of -1.606 city in miles Garage attached Number of Bathrooms 29.456 4.108

11.914 14.223

.295 .031

2.472 .289

.017 .774

a. Dependent Variable: Selling price in $'000

Regression Equation: Y = a + b1 x1 + b2 x2 + b3 x3 + b4x4 + b6 x6 + b7 x7 So, We can write, Y= 76.938+8.609x1+.044x2+23.281x3-1.606x4+29.456x6+4.108x7 Where,x1 = Number of bedrooms x2 = Size of the home in square feet x3 = Pool x4= Distance from the center of the city x6= Garage attached x7= Number of bathrooms Interpretation: Size of the homes in square feet:Co-efficient ofsize of the homes in square feet is 0.044 that means, if size of the home is increased by one square feet, the selling price of the homes will increase by Tk 0.044 considering all other factors constant. Distance from the center of the city: Co-efficient of distance from the center of the city is 1.606 that mean, if distance from the center of the city is increased by one mile, then the selling price of the homes will decrease by Tk 1606, considering all other factors constant. Garage attached: Co-efficient ofsize of the garage attached is 29.456, which means, if there is garage is attached with the homes then, the selling price of the homes will increase by Tk 29.456, considering all other factors constant.

b (1)Determine the value of R2 and multiple regression error. Interpret. Determination of R2

Model Summary Adjusted Model 1 R .750

a

R Std. Error of the Estimate 32.63257

R Square .563

Square .502

a. Predictors: (Constant), Number of Bathrooms, Pool, Garage attached, Area of home in square feet, Number of bedrooms, Distance from the center of city in miles

From thetable, R2 = .563 Interpretation: 56.3%of the total variation in the dependent variable Y (Selling price) is explained by the variation in the independent variables number of bathrooms, size of home in square feet, pool, distance from the center of the city, number of bedrooms and garage attached. Determination of the multiple standard error of the estimate:
ANOVA Model 1 Regression Residual Total Sum of Squares 58953.678 45790.047 104743.725 df 6 43 49
b

Mean Square 9825.613 1064.885

F 9.227

Sig. .000
a

a. Predictors: (Constant), Number of Bathrooms, Pool, Garage attached, Area of home in square feet, Number of bedrooms, Distance from the center of city in miles b. Dependent Variable: Selling price in $'000

Sy.123456 =

mse = 1064 .885 = Tk32.63

Interpretation: Tk 32.63 is the typical error we make when we use the multiple regression equation to estimate the dependent variables (Selling price).

c. Develop a correlation matrix. Which independent variables have strong or weak correlations with the dependent variable? Do you see any problems with multicollinearity? If so, how do you solve it? The correlation matrix:
Correlations Distance Area of Selling price in $'000 Pearson Correlation Selling price in $'000 Number of bedrooms Area of home in square feet Pool Distance from the center of city in miles Garage attached Number of Bathrooms Sig. (1-tailed) Selling price in $'000 Number of bedrooms Area of home in square feet Pool Distance from the center of city in miles Garage attached Number of Bathrooms .000 .038 .042 .022 .307 .100 .157 .274 .000 .105 . .167 .167 . .010 .000 .323 .117 .123 .103 . .201 .201 . .157 .000 .274 .105 .001 .004 . .123 .103 .307 .100 .000 . .004 .323 .117 .042 .022 . .000 .001 .010 .000 .000 .038 .513 .253 .247 .287 .073 .185 .145 .087 -.487 -.181 1.000 .140 .140 1.000 .330 -.452 -.067 -.171 .167 -.182 1.000 -.121 -.121 1.000 .145 -.487 .087 -.181 .439 .374 1.000 .167 -.182 .073 .185 .478 1.000 .374 -.067 -.171 .247 .287 1.000 Number of bedrooms .478 home in square feet .439 Pool .330 from the center of city in miles -.452 Garage Number of

attached Bathrooms .513 .253

Correlation of Dependent Variable with Independent Variable Variables Correlation Comment

Selling price of homes with number of bedrooms Selling price of homes with size of the homes Selling price of homes with the pool attached Selling price of homes with the distance from the center Selling price of homes with garage attached Selling price of homes with number of bathrooms

.478 .439 .330 -.452 .513 .253

It is a weak, positive relationship It is a weak, positive relationship It is a weak, positive relationship It is a weak, inverse relationship It is a moderate, positive relationship It is a weak, positive relationship

Correlation between the Independent Variables Variables Number of bedrooms with size of home Number of bedrooms with pool Number of bedrooms with distance from the center of the city Number of bedrooms with garage attached Number of bedrooms with number of bathrooms Size of home with pool Size of home with distance from the center of the city Size of home with garage attached Size of home with number of bathrooms Pool with distance from the center of the city Pool with garage attached Pool with number of bathrooms Distance from center of the city with garage Distance from the center of the city with number of bathrooms Garage attached with the number of bathrooms Correlation .374 -.067 -.171 .247 .287 .167 -.182 .073 .185 -.121 .145 .087 -.487 -.181 .140 Comment Weak positive relationship Weak inverse relationship Weak inverse relationship Weak positive relationship Weak positive relationship Weak positive relationship Weak inverse relationship Weak positive relationship Weak positive relationship Weak inverse relationship Weak positive relationship Weak positive relationship Weak inverse relationship Weak inverse relationship Weak positive relationship

There is no problem of Multicollinearity as all the correlations between the independent variables are less than 0.7 d. conduct the global test on the set of independent variables. Interpret. The global test: Step 1: H0: 1=2=3= 4=5= 6=0 H1: Not all the s are zero Step 2: significance Level = 0.05 Step 3: F test statistic will be used. Step 4: Decision Rule: If, P-value< - value, Ho will be rejected. P-value > - value, Ho will be accepted Step 5:
ANOVA Model 1 Regression Residual Total Sum of Squares 58953.678 45790.047 104743.725 df 6 43 49
b

Mean Square 9825.613 1064.885

F 9.227

Sig. .000
a

a. Predictors: (Constant), Number of Bathrooms, Pool, Garage attached, Area of home in square feet, Number of bedrooms, Distance from the center of city in miles b. Dependent Variable: Selling price in $'000

Decision: Since P-value (.000) <- value (.05), H0 should be rejected, and H1 is accepted. That is at least one variable has significant effect. This means that the regression model is valid; the independent variables have enough capability to estimate the selling prices of the homes.

e. conduct a test of hypothesis on each of the independent variables. Would you consider deleting any of the variables? If so, which ones? Test of hypothesis on each of the independent variables: Step 1: H0: 1=0, 2=0, 3=0, 4=0, 6=0, 7=0 H1: 10, 20, 30, 40, 60, 70 Step 2: Level of significance, = 0.05 Step 3: t- test statistic will be used. Step 4: Decision Rule: If P-value < - value, Ho will be rejected. P-value > - value, Ho will be accepted Step 5:
Coefficients
a

Standardized Unstandardized Coefficients Model 1 (Constant) Number of bedrooms Area of home in square feet Pool Distance from the center of city in miles Garage attached Number of Bathrooms a. Dependent Variable: Selling price in $'000 29.456 4.108 11.914 14.223 .295 .031 2.472 .289 .017 .774 B 76.938 8.609 .044 23.281 -1.606 Std. Error 56.607 3.396 .022 10.045 1.047 .296 .228 .244 -.181 Coefficients Beta t 1.359 2.535 2.021 2.318 -1.534 Sig. .181 .015 .051 .025 .132

Number of bedrooms: The P-value (0.015) < - value (0.05), so Ho is rejected. That is 10 The number of bedrooms is a good estimator; it has enough capability to estimate the selling price of the homes. Area of homes in sq. feet:The P-value (0.051) >- value (0.05), so Ho is accepted. That is, 2=0

The size of the homes is not a good estimator; it doesnt have enough capability to estimate the selling price of the homes. Pool: The P-value (0.025) <- value (0.05), so Hois rejected. That is, 30 The pool is a good estimator; it has enough capability to estimate the selling price of the homes. Distance from the center of the city: The P-value (0.132) > - value (0.05), so Ho will be accepted. That is, 4=0. The distance from the center of the city is not a good estimator, it doesnt have enough capability to estimate the selling price of the homes. Garage Attached: The P-value (.017) <- value (0.05). So, we reject Ho. That is, 60 The garage attached is a good estimator; it has enough capability to estimate the selling price of homes. Number of bathrooms:the P value (.774) >- value (0.05). So, we accept Ho. That is, 7=0. The number of bathrooms is not a good estimator. It doesnt have enough capability to estimate the selling price of homes. Yes, we can delete three independent variables from the analysis as they are not good estimators of the selling price of the homes. The three independent variables are Size of the home in square feet,Distance from the center of the city and Number of bathrooms.

f. Return the regression analysis with only the significant independent variables in the equation and write down the new equation.

Coefficients

Standardized Unstandardized Coefficients Model 1 (Constant) Number of bedrooms Pool Garage attached a. Dependent Variable: Selling price in $'000 B 137.621 11.834 28.955 36.746 Std. Error 15.157 3.197 10.274 11.080 .407 .304 .368 Coefficients Beta t 9.080 3.702 2.818 3.317 Sig. .000 .001 .007 .002

Regression equation:Y= a+b1x1+b3x3+b6x6 Where X1= number of bedrooms X3= Pool X6= Garage attached Interpretations: Number of bedrooms:Co-efficient of the number of bedrooms is 11.834, which means, if the number of the bedroom is increased by one, then the selling price of the homes will increase by Tk 11.834, considering all other factors constant. Pool:Co-efficient of pool is 28.955, which means, if the number of pool is increased by one, then the selling price of the homes will increase by Tk28.955, considering all other factors constant. Garage attached:Co-efficient ofsize of the garage attached is 36.746 which means, if there is a garage attached with the homes, then the selling price of the homes will increase by Tk36.746, considering all other factors constant.