10. 1. Describe the association between “DJIA price”
and “Years Since 1930”.
The association between the price and the
years since is a positive linear correlation.
2. What is the equation for your linear model? (Use
descriptive variables)
Dow Price = 125.3(years)-2.4425x10^05
3. Interpret the slope of the line in context.
The slope of my line is 125.3x the year. The
slope is fairly steep.
11. 4. Does the y-intercept of your model have a
meaningful interpretation or is it just a
hypothetical base value? Explain.
Yes, because the y-intercept tells us what y is
when X equals 0.
12. 5. Look at the residuals plot for your linear model.
Do you have any concerns about predictions made
by your model? Explain.
No because the graphs look similar, the only
difference is the directions change , one is
positive and one is negative.
6. What is the equation of your new model? (Use
descriptive variables)
Transformation Dow price=0.02707(year)-
50.38 0.02707-slope,year-x,-50.38-y-intercept
13. 7. Interpret the slope of the line in context.
The slope is 0.2707 which describes the
movement in the line for every x and y value.
8. This time, does the y-intercept of your model
have a meaningful interpretation? Explain
Yes because its positive .
14. 9. The residuals plot for your transformed model
still doesn’t look perfect, but has it improved?
How do you feel about the appropriateness of
your new model?
Yes the residual plots has improved. It is
appropriate for my new model.
10. What is the correlation for your transformed
data? What does this indicate about the
association?
The correlation is 0.97 and there is a strong
positive association.
15. 11. What is R2 for your transformed data?
Interpret this value in context.
R2 for my transformed data is 0.94 and it
explains that 94% of the variation in y is
determined by the variation in x.
12. Use your model to make a prediction about
the Dow price in July of 2012.
The predicted Dow price is 252101.1575
16. 13. You will most likely retire some time between
2040 and 2050. What does your model predict for
the Dow price in 2045? Comment on the
appropriateness of this prediction.
The predicted Dow price for 2045 is
256236.0575 . The prediction Dow Price is
appropriate.
14. What is the equation of the exponential model
that Microsoft Excel fit to the original data?
ln-price=0.062349(year)-116
17. 15. Use the exponential model to make a
prediction about the Dow price in 2012. Compare
it to the prediction made by your model. Are they
close?
The prediction value is 9.446188 and comparing
the prediction made by my model, they are not
close.
18. 16. Calculate the y-intercept of your model and
the y-intercept of the exponential model. Are they
close? Are these predictions lower or higher than
the actual Dow price on that date?
Original model is -2.44e, the y-intercept for
the exponential model -116. The predictions
for the exponential model is lower than the
original model.
19. 17. Recently, concerns about the U.S. economy, unemployment
rate, national debt, foreign relations, the world economy,
financial troubles in countries like Greece and China, climate
change, and population expansion, among others have led many
to question whether common stocks will continue to grow at 10-
12% as we move into the future. Soon, you will have finished
college, secured a position in a fulfilling career, and started
earning a rewarding salary. You, too, will have to make decisions
about the best way to invest your hard earned money in order to
insure that you have a healthy nest egg to retire on. You’ve just
studied the trend of the broader market over an 80-year period
that included numerous wars, periods of political unrest,
economic recessions, energy crises, population shifts, and
corporate scandals (just to name a few). So, are you convinced?
How do you feel about the strength of this trend? Will the market
continue to reward you the way it rewarded long-term investors
of the previous century? Or, will these new troubling
developments send you seeking other methods of investment?
Explain.
20. No , I am not convinced , America has a very
strong economy but there will be many more
changes and many more problems with the
economy. The stock market growth is
uncertain because at any day and at any given
time , there could be a major crisis in our
world. By studying Dow prices 80 year period,
the markets kept rising and falling . So the
market will not continue to reward me the
way it rewarded long term investors.