Chad Dobson has heard about the positive outlook for real estate investment in college towns. He is interested in investing in Davis, California, which houses one of the University of California campuses. He uses zillow.com to access data on 2011 monthly rent for 27 houses, along with three characteristics of the home: number of bedrooms (Beds), number of bathrooms (Baths), and square footage (Sqft). A portion of the data is shown in the accompanying table; the complete data, labeled Davis Rental, are available on the text website.
a. Estimate a linear model that uses rent and an exponential model that uses log of rent as the response variable.
b. Compute the predicted rent for a 1,500-square-foot house with three bedrooms and two bathrooms for the linear and the exponential model (lgnore the significance tests).
c. Use R2 to select the appropriate model for prediction.