Question

Using the “Experience and Income.xlsx” file, determine the sample correlation coefficient between the annual salary and the job market experience variables. You must submit your actual Excel file with the output as part of the assignment. Annual Salary 1 Years of Job Market Experience 0.121452784 1 Part (b) (2 points) Interpret the sample correlation coefficient you found in part (a). Part (c) (2 points) If we regressed income on experience, what share of the variation in income could be explained by the variation in experience? Explain how you found your answer.

Answer 1

(B) it is given that sample correlation is 0.12145

Magnitude of correlation coefficient is 0.12145, which is below 0.20. So, we can say that the relationship between dependent and independent variable is very weak

Correlation coefficient is positive, so we can conclude that there is a positive relationship between the variables, i.e. increase in independent variable causes an increase in the dependent variable

(C) Coefficient of determination = r^2

setting r = 0.12145

we get

coefficient of determination = 0.12145^2 = 0.0148

converting to %, we get 0.0148*100 = 1.48%

So, only 1.48% of variation in income could be explained by the variation in experience