Math

MATH 141

Name:____________________

Linear Regression Activity – Car Depreciation

Modeling Depreciation Using Linear regression

1. State the make, model and MSRP of the chosen car:

2. Data collected from Kelly Blue Book:

Year of

manufacture

Trade in

value

3. Data adjusted for creating a linear regression model of the car’s depreciation:

Let x represent the age of the car in years and y represent the trade in value in dollars

x

y

4. The Linear Regression Model obtained from the data is:

Draw a scatterplot and complete graph of the linear regression model for your car. Make sure to

include the following in the graph above:

• Label axes with appropriate variables

• Label axes with subtitles

• Label the graph with its equation

• Label the horizontal intercept as a coordinate pair

• Label the vertical intercept as a coordinate pair

Interpretation of the Linear Regression Model:

1. Give the slope:

Interpret the slope in the context of the problem:

2. Give the vertical intercept:

Interpret the vertical intercept in the context of the problem:

3. Give the horizontal intercept:

Interpret the horizontal intercept in the context of the problem:

4. Use your regression model to determine the predicted resale value of your car 5 years

after its purchase (when the car is 5 years old)

5. Do you expect all cars (different make and models) to depreciate in the same way (to

have the same linear regression model)? Explain your answer.

6. Most banks and credit unions provide car loans ranging from 24 to 72 months (2 to 7

years), while the most common mortgages range from 10 to 30 years. Use your

regression model to explain why it would not make sense to offer a car loan ranging up to

30 years.