Based on the scatterplot and residual plot, is a linear model appropriate for the growth of stock price?
A small technology company started offering shares of
stock to investors in 1987. At that time, the price of
one share of stock was $0.39. Since then, the
company has experienced rapid growth. Twenty-two
years later, the price of a single share of stock has
risen to over $110. The scatterplot shows the number
of years since the initial stock offering in 1987 and the
price of the stock.
O Alinear model is appropriate because the
regression line fits the scatterplot well.
O Alinear model is not appropriate because the
residual plot is centered about zero.
Alinear model is not appropriate because the
residual plot shows a clear pattern
Alinear model is not appropriate because the
scatterplot shows a clear pattern
Stock Prices vs. Years Since 1987
120
110
100
90
80
tock Price (Dollars)
60
20