A jewelry firm wants to submit a bid to purchase a large collection of diamonds but is uncertain how much it should bid. You will use the results from a predictive model to make a recommendation on how much the jewelry company should bid for the diamonds.
A diamond distributor has recently decided to exit the market and has put up a collection of 1,000 diamonds up for auction. Seeing this as a great opportunity to expand its inventory, a jewelry firm is interested in making a bid. To determine how much to bid, the firm’s analytics department will use a large database of diamond prices to build a linear regression model to predict the price of a diamond based on its attributes.
As the business analyst, you are tasked to build the linear regression model and apply that model to make a recommendation for how much the company should bid for the entire collection of 1,000 diamonds. (CLOs 1,5,7,8,10,11)
To complete this assignment, you will be submitting a file in Word using a report format to provide the answers to the following questions across five steps.
Step 1 – Research and Reflect:
Step 2 – Understanding the Model:
There are two datasets.
Both datasets contain carat, cut, and clarity data for each diamond. Only the diamonds12.xlsx dataset has prices.
Using Excel, build the linear regression model using the diamonds12.xlsx dataset.
Step 3 – Calculate the predicted price for each diamond: Using the new_diamondsa.xlsx dataset, for each diamond, plug in the values for each of the variables into the linear model (equation), then solve the equation to get the estimated, or predicted diamond price.
Step 4 – Visualize the Data: Create two scatter diagrams (or scatter plot).
Step 5 – Make the Recommendation: Now that you have the predicted price for each diamond, it’s time to calculate the bid price for the whole set. Note: The diamond price that the model predicts represents the final retail price the consumer will pay. The company generally purchases diamonds from distributors at 70% of that price, so your recommended bid price should represent that. What bid do you recommend for the jewelry company? Please explain how you arrived at that number. (CLOs 1,5,7,8,10,11)
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