Description

Assignment Objective:

The purpose of this project is to apply the linear regression analysis concepts that you have learned in chapter 4 to a real life application.

Introduction:

Here’s a sample data taken from a population of individuals who are being offered a certain interest rate based on their FICO scores:

data table

FICO Score Interest Rate

674 15.27

764 6.03

689 11.71

759 6.03

709 12.42

694 11.71

714 11.71

694 11.71

734 9.91

699 14.27

In this project you will describe and analyze the relationship between FICO Score and Interest Rate the way it is explained in Chapter 4 (4.1-4.2) using the sample data that’s provided above.

Instructions:

To complete this assignment you may choose to work on your own or with your peers as a group. The group should be limited to a maximum of 4 students.

For this project you are expected to produce a typed report (using a word document).

Use Statcrunch for computations or to generate tables and graphs, copy the Statcrunch results/tables/graphs into your word document. You can take a screenshot of Statcrunch results and paste them into your report. For example your paper must contain the scatter diagram that you generate in Statcrunch, it should contain the screen shot of Statcrunch chart that shows the least squares regression line (the linear equation) and etc.

To create your report answer the questions given below (see the ‘Questions’ section below).

Once you are done with your report, upload your project report as a word document or a pdf. If you work as a group, only one project report submission is required on behalf of the group (assign one of the members to upload the report on behalf of the group).

At the end of the report clearly state the name of contributing members, along with a brief description of who has done what.

Review the grading rubric to make sure you have included all it’s necessary in your report. View the rubric by clicking on the three dots on the right top corner of this assignment for details on grading.

Questions:

Identify the two variables in this analysis.

Indicate whether each variable is qualitative or quantitative.

Indicate whether each quantitative variable is discrete or continuous.

Input the given sample data into Statcrunch and create a scatter plot treating FICO score as the explanatory variable, x, and the Interest Rate as the response variable, y. Take a screen shot of your scatter plot and include it in your report.

Based on your scatter plot do you suspect a linear relationship between the two variables? Comment on the direction and the strength of the relationship based on what you see on the scatter diagram. (This is only based on your observation of the scatter plot, you will make conclusions after the linear analysis steps are completed.)

Compute the linear correlation coefficient, r, between the two variables and interpret the meaning specifically for the given data. Use the list of the critical values given below to determine whether you have enough data to make any claims based on the linear correlation coefficient obtained. Clearly explain in your report how you have used the critical value to make the final determination about the linear relationship between the two variables.

Find the least-squares regression line equation using Statcrunch. Be sure to copy Statcrunch results into your report (Take a screen shot and paste it into your word document). Additionally rewrite the equation in your report using the form �=��+�.

Looking at your least-squares regression line equation what is the slope of the best fitting line?

Interpret the slope.

Looking at your least-squares regression line equation what is the y-intercept?

Interpret the y-intercept if appropriate. (Note that credit scores have a range of 300 to 850).

Suppose Bob has a FICO score of 680 and he is offered an interest rate of 8.3%. Is this a good offer? Why? Show detailed work on your report on how you have concluded your provided answer.