Researchers would like to see if a difference in price exists between homes located on a waterfront and those that are not (after controlling for the other variables in the model). Using the variable Waterfront, create a dummy variable in Excel called W where:
W = 1 if home is located on a waterfront
W = 0 otherwise
The regression model becomes:
1. Estimate the regression above.
2. Carry out a t-test for the coefficient on the dummy variable W. Interpret the results in the context of the problem. Use an alpha-level of 10%.
3. Interpret the coefficient on the dummy variable W in the context of the problem.
4. Predict the selling price (in $1,000s) of a non-waterfront home with 1800 square feet, 3 bedrooms, and 2 bathrooms.
5. Predict the selling price (in $1,000s) of a waterfront home with 1800 square feet, 3 bedrooms, and 2 bathrooms.