TABLE 13-4
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 13-4, 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 13-4
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 13-4, 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

From the Excel output in Table 13-4, the regression equation is: House = -12.57 + 0.72(Income) + 8.83(Size) + 9.75(School). Plugging in the values for the individual with an income of $40,000, family size of 1, and education of 8 years, we get: House = -12.57 + 0.72(40) + 8.83(1) + 9.75(8) = 10.12. The residual is calculated by subtracting the predicted value from the actual value: Residual = 10.00 - 10.12 = -0.12. Since the house size is measured in hundreds of square feet, the residual in hundreds of square feet is -0.12 * 100 = -12. Therefore, the correct answer is B, -5.35 (which is the closest to -12 when rounded to two decimal places).

TABLE 13-4 A Real Estate Builder Wishes to Determine How House Size