Correlation Coefficient Computation of Sales, Costs and GNP
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What is the correlation coefficient between Irwin's sales and costs and between sales and GNP growth?
Year GNP Growth Sales Costs
1990 2.0% $105,400 $71,000
1991 1.5 101,900 72,200
1992 -2.0 100,400 72,300
1993 -1.0 102,200 72,500
1994 0.5 104,000 72,000
1995 -1.0 99,950 71,300
1996 1.0 103,300 72,300
1997 2.0 102,800 72,100
1998 2.5 104,900 72,300
1999 0.0 100,100 72,500
2000 2.0 104,600 71,200
2001 1.5 102,000 71,730
2002 3.0 103,300 70,600
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Solution Summary
The solution computes and interprets the result of the correlation coefficient between Irwin's sales and costs and between sales and GNP growth. A spreadsheet formula was used to solve the problem.
Solution Preview
Using Spreadsheet software:
Pearson r correlation= =PEARSON(D3:D15,E3:E15) ---> this is the formula
Pearson r correlation= -0.3348
Note: The formula is embedded in the attached Spreadsheet file.
How to interpret:
1. Use the Pearson r table.
2. Select .05 level of significance.
3. Find the degrees of freedom. This can be obtained by df-2. Since the ...
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