Construct a higher order models until you are satisfied you have found the best polynomial model.
a)

From the above three polynomial models with degrees 1, 2 and 3 respectively on the explanatory variable Horsepower, the corresponding R-sq(adj) are 37.6%, 50.1%, and 53.7% respectively. The increase in R-sq(adj) from degree 1 to degree 2 model is approximately 10 with an increasing 1 parameter on the model. Hence, the model 2 with degree 2 fits better than model 1 with degree 1. The increase in R-sq(adj) from degree 2 to degree 3 model is approximately 4 with an increasing 1 parameter on the model. Hence, the model 3 with degree 3 does not increase the fitness fits than model 2. Hence, the best polynomial model for these given data is the model with degree 2.
b) The R2-adjusted= R-Sq(adj) = 50.1%
c) the Plot of Fitted Model and Residuals versus X output is

From the above residual VS fitted value plot, the plot shows that the residuals and the fitted values are uncorrelated. Also, the linear model should be in a homoscedastic with normally distributed errors. Whereas, some of the points (around three points) have deviated largely from the remaining. Hence, some data points may be the outlier.
d) Predict the highway mileage of a car with 150 horsepower. Also, construct 95% confidence and prediction intervals for such a car.
Ans: The predicted highway mileage of a car with 150 horsepower is
MPG Highway = 50.2 - 0.225* 150 + 0.000482 *150^2= 27.262.
95% confidence intervals for such a car is (26.286, 28.239).
95% prediction intervals for such a car is (19.715, 34.809).
Construct a higher order models until you are satisfied you have found the best polynomial model....
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Please show how you did this in excel.
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