# Determining a relationship between variables and the correlation coefficient.

A real estate broker hoped to develop an equation that could be used to predict the sales price of homes in a certain suburb. It seemed to him that the most important variables, since all the homes were in pretty much the same locale, were age of house, square feet, and number of bedrooms.

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X=7.1 Y=90.7 x=0.4 y=-0.2 Sigma x^2=87.76

Sigma y^2=2481.44 Sigma xy=408.62

Determine the relationship between sales price and age of house and determine the correlation coefficient.

Is the age of the house significant factor at alpha=0.05 in determining sales price? Explain

What does the fact that the correlation is less than 100% suggest?

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...r>r= Sigma xy/(Sigma x^2 * Sigma y^2)^0.5 where -1 < r < 1

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<br>The closer r is to 1 or -1, the stronger the linear relationship; whereas, the

<br>closer to 0 implies little (or no) linear relationship.

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<br>The hypothesis test for Linear Correlation is computed with ...