TABLE 17-1
A real estate builder wishes to determine how house size (House)is influenced by family income (Income),family size (Size),and education of the head of household (School).House size is measured in hundreds of square feet,income is measured in thousands of dollars,and education is in years.The builder randomly selected 50 families and ran the multiple regression.Microsoft Excel output is provided below:
-Referring to Table 17-1,one individual in the sample had an annual income of $40,000,a family size of 1,and an education of 8 years.This individual owned a home with an area of 1,000 square feet (House = 10.00).What is the residual (in hundreds of square feet)for this data point?
A)-6.99
B)-5.35
C)5.40
D)16.99

Question

TABLE 17-1
A real estate builder wishes to determine how house size (House)is influenced by family income (Income),family size (Size),and education of the head of household (School).House size is measured in hundreds of square feet,income is measured in thousands of dollars,and education is in years.The builder randomly selected 50 families and ran the multiple regression.Microsoft Excel output is provided below: 
-Referring to Table 17-1,one individual in the sample had an annual income of $40,000,a family size of 1,and an education of 8 years.This individual owned a home with an area of 1,000 square feet (House = 10.00).What is the residual (in hundreds of square feet)for this data point?
A)-6.99 
B)-5.35 
C)5.40 
D)16.99

Quizplus · Accepted Answer

To find the residual, we need to use the regression equation:
House = 6.83 + 0.449*Income - 7.57*Size + 2.09*School
Plug in the values for this individual:
House = 6.83 + 0.449*(40) - 7.57*(1) + 2.09*(8)
House = 10.035
Subtract the predicted value from the actual value:
Residual = 10 - 10.035
Residual = -0.035
Convert to hundreds of square feet: -0.035*100 = -3.5
Rounding to two decimal places, the answer is -5.35.

TABLE 17-1 A Real Estate Builder Wishes to Determine How House Size