Relax mortgage has gathered following data to examine the relationship between housing starts and mortgage interest rate. Interest rate 3.5 3.0 2.8 3.6 2.75 3.4 3.12 2.86 3.02 2.6 3.3 Housing starts 100 120 150 130 170 135 130 185 127 190 96 You are required to; i. Derive the regression equation ii. Estimate the no of housing starts if mortgage interest rate is 2.5% iii. Calculate and interpret the correlation between interest rate and no of housing starts.
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
Relax mortgage has gathered following data to examine the relationship between housing starts and mortgage interest rate.
Interest rate
3.5
3.0
2.8
3.6
2.75
3.4
3.12
2.86
3.02
2.6
3.3
Housing starts
100
120
150
130
170
135
130
185
127
190
96
You are required to;
i. Derive the regression equation
ii. Estimate the no of housing starts if mortgage interest rate is 2.5%
iii. Calculate and interpret the
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