Question: Interest rates and mortgages again. In Chapter 7, exercise 32, we saw a plot of total mortgages in the United States (in millions of 2005 dollars) versus the interest rate at various times over the past 26 years. The correlation is r = - 0.84. The mean mortgage amount is $151.9 million and the mean interest rate is 8.88%. The standard deviations are $23.86 million for mortgage amounts and 2.58% for the interest rates.

1. Is a regression model appropriate for predicting mortgage amount from interest rates? Explain.
2. What is the equation that predicts mortgage amount from interest rates?
3. What would you predict the mortgage amount would be if the interest rates climbed to 20%?
4. Do you have any reservations about your prediction in part c?
5. If we standardized both variables, what would be the [regression equation that predicts standardized mortrgage amount from standardized interest rates?
6. If we standardized both variables, what would be the regression equation that predicts standardized interest rates from standardized mortgage amount?

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