Since 1985, average mortgage interest rates have fluctuated from a low of under

Question

Since 1985, average mortgage interest rates have fluctuated from a low of under 6% to a high over 14%. Is there a relationship between the amount of money that people borrow and the interest rate that's offered? Here is a scatterplot of Mortgage Loan Amount in the US (in thousands of dollars) versus Interest Rate at various times over the past 26 years. The correlation is -0.86

A)if we were to measure mortgage loan amount in hundred of dollars instead of thousands of dollars, how would the correlation coefficent change?

nce ,avelage 8age terest lates na there a relationship between the amount of m Here is a scatterplot of Mortgage Loan Amour various times over the past 26 years. The corre 200 150 10 12 Interest Rate (%) 6. Describe the relationship between Mortgage L

Explanation / Answer

As we know that correlation coefficient is independent of scale and orign thus when we convert loan amount in hundred of dollars instead of thousands of dollars, the correlation coefficinent will notr be change.

suppose x*1000 is loan amount in thousands

now x*1000 / 10 is a new loan amout thta converts the orignal amount into the new loan amount. in this new amout value denomenator 10 is scale. thus thre will not be change in the correlation coefficient by changing the scale.

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