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    Statistics - Correlation coefficient

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    We are studying mutual bond funds for the purpose of investing in several funds. For this particular study, we want to focus on the assets of a fund and its five-year performance. The question is: Can the five-year rate of return be estimated based on the assets of the fund? Nine mutual funds were selected at random, and their assets and rates of return are shown below.
    Fund Assets ($ millions) Return (%) Fund Assets ($ millions) Return (%)
    AARP High Quality Bond $622.2 10.8 MFS Bond A$494.5 11.6
    Babson Bond L 160.4 11.3 Nichols Income 158.3 9.5
    Compass Capital Fixed Income 275.7 11.4 T. Rowe Price Short-term 681.0 8.2
    Galaxy Bond Retail 433.2 9.1 Thompson Income B 241.3 6.8
    Keystone Custodian B-1 437.9 9.2

    1. Draw a scatter diagram.
    2. Compute the coefficient of correlation.
    3. Compute the coefficient of determination.
    4. Write a brief report of your findings for parts b and c.
    5. Determine the regression equation. Use assets as the independent variable.
    6. For a fund with $400.0 million in sales, determine the five-year rate of return (in percent)

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    Solution Summary

    This solution addresses 6 statistics questions that include drawing a scattergram, determining coefficients of both correlation and determination and the regression equation.