1. Millions of boats are registered in the United States. As is the case with automobiles, there is an active used-boat market. Many of the boats purchased require bank financing, and, as a result, it is important for financial institutions to be capable of accurately estimating the price of boats. One variable that affects the price is the number of hours the engine has been run. To determine the effect of the hours on the price, a financial analyst recorded the price (in $1,000s) of a sample of 2007 24-foot Sea Ray cruisers (one of the most popular boats) and the number of hours they had been run. Determine the least squares line and explain what the coefficients tell you.
2. Florida condominiums are popular winter retreats for many North Americans. In recent years, the prices have steadily increased. A real estate agent wanted to know why prices of similar-sized apartments in the same building vary. A possible answer lies in the floor. It may be that the higher the floor, the greater the sale price of the apartment. He recorded the price (in $1,000s) of 1,200 sq. ft. condominiums in several buildings in the same location that have sold recently and the floor number of the condominium.
a. Determine the regression line.
b. What do the coefficients tell you about the relationship between the two variables?
c. Does it appear that the errors are normally distributed? Explain.
d. Does it appear that heteroscedasticity is a problem? Explain.