Question

From the table below, calculate the correlation coefficient and the coefficient of determination.

Inflation rate (x)	Prime lending rate (y)
3.2	5.2
6.2	8.0
11.0	10.8
9.1	7.9
5.8	6.8
6.5	6.9
7.6	9.0

Answer 1

For correlation coefficient:

Follow the below steps:

1. Find the average of X and Y (A10 and B10)

2. Subtract the average of X and Y with each value of X and Y respectively, lets name them as 'a' and 'b'.

3. Calculate a*b,

4. sum up a*b, (E10,F10,G10)

5. Divide the sum of a*b (E10) with the square root of [(sum of a2) × (sum of b2)].

Using the formula in step 5, we get the value as 0.909

Coefficient of determination

Coefficient of determination = R sqaured = 0.826

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