Question

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. stock prices vs. years since 1987 (with a scatterplot and regression line). based on the scatterplot and residual plot, is a linear model appropriate for the growth of stock price? a linear model is appropriate because the regression line fits the scatterplot well. a linear model is not appropriate because the residual plot is centered about zero. a linear model is not appropriate because the residual plot shows a clear pattern. a linear model is not appropriate because the scatterplot shows a clear pattern.

Explanation:

A linear model is appropriate if residuals show no pattern (random scatter). The correct reasoning for inappropriateness here is a clear residual pattern, which violates linearity assumptions.

Answer:

A linear model is not appropriate because the residual plot shows a clear pattern.