dow jones project

1. Courtney Verdree
AP Statistics

2. Introduction
 . The purpose of this project was to
determine whether or not the Dow Jones
Averages would be a good investment
and to graph the data for interpretation.

8. Linear Graph

9. Exponential Graph

10. Power Graph

11. 1. Describe the association between “DJIA
price” and “Years Since 1930”.
 The association between the price and the
years since is a positive linear correlation.
2. What is the equation for your linear model?
(Use descriptive variables)
 Dow Price = 125.3(years)-2.4425x10^05
3. Interpret the slope of the line in context.
 The slope of my line is 125.3x the year.
The slope is fairly steep.

12. 4. Does the y-intercept of your model have a
meaningful interpretation or is it just a
hypothetical base value? Explain.
 Yes, because the y-intercept tells us what
y is when X equals 0.

13. 5. Look at the residuals plot for your linear
model. Do you have any concerns about
predictions made by your model? Explain.
 No because the graphs look similar, the
only difference is the directions change ,
one is positive and one is negative.
6. What is the equation of your new model?
(Use descriptive variables)
 Y hat= .06234(year)-166

14. 7. Interpret the slope of the line in context.
 The slope is .06234 , which describes the
movement in the line for every x and y
value.
8. This time, does the y-intercept of your model
have a meaningful interpretation? Explain
 Yes because it has positive strong
correlation between the data and the R2 is
close to 100%.

15. 9. The residuals plot for your transformed model
still doesn’t look perfect, but has it improved?
How do you feel about the appropriateness of
your new model?
 Yes the residual plots has improved because
its showing a much stronger correlation. It is
appropriate for my new model.
10. What is the correlation for your transformed
data? What does this indicate about the
association?
 The correlation .9357. this indicates that it’s
a linear positive relationship and that the
exponential graph would be the best fit to
interpret the data.

16. 11. What is R2 for your transformed data?
Interpret this value in context.
 R2 for my transformed data is 0.94 and it
explains that 94% of the variation in y is
determined by the variation in x. This
shows a positive association.
12. Use your model to make a prediction
about the Dow price in July of 2012.
 y hat= .06234(2012)-116
= 9.42808

17. 13. You will most likely retire some time between
2040 and 2050. What does your model predict
for the Dow price in 2045? Comment on the
appropriateness of this prediction.
 =.06234(2045)-116
=11.4853
e^11.4853= 972425.26
14. What is the equation of the exponential model
that Microsoft Excel fit to the original data?
 Y hat=.06234(year)-116

18. 15. Use the exponential model to make a
prediction about the Dow price in 2012.
Compare it to the prediction made by your
model. Are they close?
 Y hat=.06234(2012)-116
=9.42808
e^9.42808=12432.63

19. 16. Calculate the y-intercept of your model and
the y-intercept of the exponential model. Are
they close? Are these predictions lower or
higher than the actual Dow price on that date?
 Original model is -2.44e, the y-intercept
for the exponential model -116. The
predictions for the exponential model is
lower than the original model.

20. 17. Recently, concerns about the U.S. economy,
unemployment rate, national debt, foreign relations, the world
economy, financial troubles in countries like Greece and
China, climate change, and population expansion, among
others have led many to question whether common stocks
will continue to grow at 10-12% as we move into the future.
Soon, you will have finished college, secured a position in a
fulfilling career, and started earning a rewarding salary. You,
too, will have to make decisions about the best way to invest
your hard earned money in order to insure that you have a
healthy nest egg to retire on. You’ve just studied the trend of
the broader market over an 80-year period that included
numerous wars, periods of political unrest, economic
recessions, energy crises, population shifts, and corporate
scandals (just to name a few). So, are you convinced? How
do you feel about the strength of this trend? Will the market
continue to reward you the way it rewarded long-term
investors of the previous century? Or, will these new
troubling developments send you seeking other methods of
investment? Explain.

21.  yes, I am not convinced , America has a
very strong economy and In another 80
years the government will see many
more changes, but they can fix it. Yes I
would invest into the company because
the exponential graph fits better on the
line of best fit and its better for your
money to grow exponentially then
linearly.