Question

What would be the correlation coefficient between the annual salaries of college and high school graduates at a given company, if for each possible job title the college graduates always made:

(a) $5,000 more than high school grads?

(b) 25% more than high school grads?

(c) 15% less than high school grads?

Answer 1

let X is salary of high school grads and Y is salary of college grad

a)

for college graduates always made $5,000 more than high school grads , indicate relation:

y =x+5000

which has a positive slope , therefore correlation coefficient =1

b)

for college graduates always made 25% more than high school grads , indicate relation:

y=1.25x

which has a positive slope , therefore correlation coefficient =1

c)

for college graduates always made 15% less than high school grads , indicate relation:

y=0.85x

which has a positive slope , therefore correlation coefficient =1