Scatter Plot
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If interest rates fall another one percentage point to 3 percent in August. There is also broad agreement that interest rates will remain low for a long time to come. By the end of the summer, mortgage rates could have crept down to just over 4 percent, the lowest level in modern times. Mortgage rates are unlikely to rise above 6.5 per cent in the next ten years.
Create a scatterplot with interest rates on the X-axis and the number of housing starts on the Y-axis. (For information about how to do this, use the Excel "Help" utility and enter "Scatterplot." Then I would like you to compute a simple regression formula using the interest rates and number of housing starts provided below. Once you have computed your regression formula answer the following questions.
1. What is the regression formula that you computed?
2. What would the approximate number of housing starts be at the following interest rates: 8.5%, 4.5%, 3.7%, 2.3%?
3. If you were the owner of a business in the housing construction sector and you knew interest rates were going to change; how could you use this information to make better decisions?
Housing Starts in Relation to Interest Rates
Interest Rate Housing Starts
11% 9,000
10% 10,000
9% 24,000
8% 40,000
7% 52,000
6% 65,000
5% 80,000
4% 100,000
3% 130,000
2% 135,000
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Solution Summary
The solution provides step by step method for the scatter plot of a bivariate data . Formula for the calculation and Interpretations of the results are also included.
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