Mortgage Loan Analysis

With the recent credit crisis, SIM Bank International would like to do a detailed study on its recent mortgage loans. Of particular interest is how such factors as the value of the house (in S$’000), age of the head of household, current monthly mortgage payment (in S$), and the gender of the head of household (male =1, female = 0) related to the family income (in S$’000). SIM Bank International has requested your assistance to conduct a statistical analysis to determine whether these variables are effective predictors of the income of the household. A dataset of 25 recent loans is provided for your analysis.

Question 1

Develop scatter diagrams, and hence comment on the relationship of each of the following independent variables with the dependent variable, Family Income ($):

1. the value of the house,
2. age of the head of household,
3. current monthly mortgage payment,
   Question 2
   Analyze the relationship between the value of the home and family income as follows:
   1. Determine the coefficient of correlation between the value of the house and family income using SPSS. Show the SPSS output and comment on your finding.
   2. Compute the coefficient of determination and provide an interpretation.
   3. Using critical value approach, conduct an appropriate test at a significant level of 0.05 to determine whether the correlation between the two variables is zero.
   4. Determine the linear regression equation and find the expected family income when the value of the house is $175,000.

Question 3

Conduct a multiple regression analysis between the dependent - variable family income and independent variables - value of the house (in S$’000), age of the head of household, current monthly mortgage payment (in S$), and the gender of the head of household. Your analysis should include the following:

- Relevant SPSS outputs

- General Multiple Regression Equation and its interpretation

- Model Fit

- Global Test (or F -test)

- Testing of Individual Regression Coefficients

- Residual Analysis

Question 4

Based on your analysis in Question 3, in about 300 words, discuss what are the business considerations and implications you would like to highlight to SIM Bank International. (10 marks)

Price: $14.63

Solution: The downloadable solution consists of 7 pages, 763 words and 3 charts.
Deliverable: Word Document