TSTA602 Assignment 2
May 11, 2020
Instructions. This assignment has a total of 30 marks and worth 30% of the final
grade of TSTA602. The detailed marks allocation are provided at the beginning of
each question. You are encouraged to discuss the assignment with your peers, but
must write down your own solution. This assignment is due at 5pm on Friday of
Week 11 (12th June, 2020). Please submit your assignment on Moodle before
the deadline.
Scenario. You, as a property investor, are interested in understanding which factor
(or factors) drives the prices of investment properties. A dataset is collected which
contains the prices (in thousand dollars, as denoted by apart price) for 50 one-
bedroom apartments in city X, their corresponding rents per week (in dollars, as
denoted by rent) and the costs to hold each of these properties per week (in dollars,
as denoted by cost of property). Following the procedures below to analyse the
dataset ’assign2 data.csv’ by using Rstudio. Please only include relevant outputs
from Rstudio in your solution and attach the R codes as appendice.
(a). (2 marks) Import the data into Rstudio, draw two scatter plots: apart price
versus rent and apart price versus cost.
(b). (4 marks) Fit the following two linear models:
Model 1: apart price = b0 + b1 × rent
Model 2: apart price = c0 + c1 × cost
Write down the equations of the two models with correct coefficients.
(c). (4 marks) Comment on the significance of all coefficients obtained from (b)
based on the p-values (from the outputs of Rtudio). The significance level is
0.05.
(d). (6 marks) Produce residual plots for each model in (b), comment on each plot.
(e). (4 marks) Produce normal qq plots for each model in (b), and comment on
each plot.
(f). (3 marks) Fit the following linear model:
Model 3: apart price = d0 + d1rent + d2cost
Write down the equation of the model with correct coefficients.
(g). (3 marks) Comment on the significance of all coefficients obtained from (f)
based on the p-values (from the outputs of Rtudio). The significance level is
0.05.
(h). (2 marks) Compare Model 1 and Model 3, explain which one is better.
(i). (2 marks) Given rent = 810 and cost = 800, predict the prices under Model
1 and Model 3.