Part (a) (2 points) Use the “Trucks.xls” file posted with this assignment to obt

Question

Part (a)            (2 points)

Use the “Trucks.xls” file posted with this assignment to obtain the correlation coefficient between the “Maintenance cost per month” and the “Size” variables in Excel.

You must submit your Excel file with the output as part of the assignment.

Part (b)            (3 points)

Interpret the correlation coefficient that you obtained in part (a), i.e., explain what the number means.

Speedy Delivery's Truck Maintenance Maintenance cost per month (in Dollars) Age (in years) Miles per month Diesel dummy (1 = Diesel; 0 = gasoline) 382 3 818 0 469 8 812 1 503 8 857 1 432 6 819 1 478 6 821 1 493 10 1008 1 461 6 849 1 503 10 883 1 546 8 870 1 380 9 803 1 471 9 815 1 444 2 757 1 452 9 831 1 546 8 870 1 380 9 803 1 471 9 815 1 444 2 757 1 452 9 831 1 561 12 838 1 496 8 839 1 466 10 865 0 422 8 869 0 474 10 845 0 558 10 885 0 497 10 859 0 355 3 806 0 436 2 785 0 514 11 980 0 497 10 859 0 355 3 806 0 436 2 785 0 514 11 980 0 466 10 865 0 422 8 869 0 474 10 845 0 329 7 853 1 505 10 822 1 433 9 848 1 357 8 760 1 329 3 741 1 478 6 821 1 493 10 1008 1 558 10 885 0 359 7 751 0 427 5 780 0 474 9 857 0 382 3 818 0 459 8 826 0 406 3 798 0 459 8 826 0 359 7 751 0 427 5 780 0 329 7 853 1 505 10 822 1 433 9 848 1 357 8 760 1 329 3 741 1 478 6 821 1 474 9 857 0 382 3 818 0 406 3 798 0 452 9 831 1 546 8 870 1 380 9 803 1 471 9 815 1 444 2 757 1 452 9 831 1 561 12 838 1 496 8 839 1 466 10 865 0 422 8 869 0 474 10 845 0 558 10 885 0 406 3 798 0 452 9 831 1 546 8 870 1 380 9 803 1 471 9 815 1 329 7 853 1 505 10 822 1 359 7 751 0 427 5 780 0 474 9 857 0 382 3 818 0 459 8 826 0 406 3 798 0 459 8 826 0 359 7 751 0 427 5 780 0 329 7 853 1 505 10 822 1 433 9 848 1 357 8 760 1

Explanation / Answer

Part a)

Excel formula for correlation coefficient = correl(Range of A, Range of B)

Here,

A = Maintenance cost per month

B = Size

Size data is not given in the table so i can't calculate that, You can calculate it by using the excel function correl and selecting the entire range of maintenance cost, entire range of size.

b) Correlation coefficient represents the degree of linear association between two variables. It can range between -1 and 1.

If it is close to 1 then the relationship is strong positive. If it is close to -1 then relationship is strong negative and if it is close to 0 then there is no relationship between the given variables.

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