How is a characteristic such as the presence of a pool entered into a regression model?
Correct Answer
B) As a dummy variable coded one or zero
Why this is correct: A dummy variable codes a categorical feature (e.g., pool) as 1 if present and 0 if absent, allowing regression to estimate its contribution to value. Why the other choices are wrong: "As the dependent variable in a second model" is incorrect; the dependent variable is the sale price. "As a sale price divided by the pool cost" creates a ratio, not a proper variable. "As a percentage of the total living area" is for quantitative features, not presence/absence. Exam tip: Use dummy variables (0/1) for qualitative characteristics like pool, location, or condition.
Why This Is the Correct Answer
Why this is correct: A dummy variable codes a categorical feature (e.g., pool) as 1 if present and 0 if absent, allowing regression to estimate its contribution to value. Why the other choices are wrong: "As the dependent variable in a second model" is incorrect; the dependent variable is the sale price. "As a sale price divided by the pool cost" creates a ratio, not a proper variable. "As a percentage of the total living area" is for quantitative features, not presence/absence. Exam tip: Use dummy variables (0/1) for qualitative characteristics like pool, location, or condition.
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Previous Question
An appraiser includes both 'total room count' and 'bedroom count' as independent variables in a regression model estimating single-family home sale prices. The variance inflation factor (VIF) for 'bedroom count' is calculated as 12.3. What is the most appropriate appraisal action based on this result?
Next Question
The interquartile range of a set of sale prices describes which of the following?