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Homework 3 (4 Points), due at the beginning of class on September 21, 2016 Please use House data posted on my webpage to answer following questions • Q1 (1 point) Report the multiple regression log(rpice) = β0 + β1 darea + β2 darea2 + u, (Regression A) where darea is the demeaned area (or deviation of area from its mean): darea = area − sample mean of area. Please interpret β1 . How to check whether the quadratic term darea2 is necessary? Hint: read page 199. • Q2 (1 point) Report the multiple regression: rpice = β0 + β1 area + β2 baths + u, (Regression B) and find the 90% prediction interval for rpice for a house with area = 2000, baths = 3. Please describe how to make the economic decision whether or not to buy this house. Hint: read page 208 and equation [6.31]. To change the significance level, consider reg y x, level(90) • Q3 (2 point) Consider the Beta regression zrpice = c0 + c1 zarea + c2 zbaths + u, (Regression C) where zw denotes the z score of variable w (Read page 189). Consider the null hypothesis H0 : c1 = c2 . How to interpret this hypothesis? Please fit a restricted regression that imposes this null hypothesis and obtain RSS r . Finally, show me the math to obtain the F test for this null hypothesis, and draw a conclusion. 1