Exhibit 7-1
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $$\begin{array}{c}
\underline {\text { Rates of Return }}\
\begin{array} { c c c }
\text { Year } & \text { RA Computer } & \text { Market Index } \
\hline 1 & 13 & 17 \
2 & 9 & 15 \
3 & - 11 & 6 \
4 & 10 & 8 \
5 & 11 & 10 \
6 & 6 & 12
\end{array}
\end{array}$$
-Refer to Exhibit 7-1. Compute the correlation coefficient between RA Computer and the Market Index.
A) -0.32
B) 0.78
C) 0.66
D) 0.58
E) 0.32

Question

Exhibit 7-1
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $$\begin{array}{c}
\underline {\text { Rates of Return }}\
\begin{array} { c c c } 
\text { Year } & \text { RA Computer } & \text { Market Index } \
\hline 1 & 13 & 17 \
2 & 9 & 15 \
3 & - 11 & 6 \
4 & 10 & 8 \
5 & 11 & 10 \
6 & 6 & 12
\end{array}
\end{array}$$
-Refer to Exhibit 7-1. Compute the correlation coefficient between RA Computer and the Market Index.
A) -0.32
B) 0.78
C) 0.66
D) 0.58
E) 0.32

Quizplus · Accepted Answer

The correlation coefficient is calculated using the formula for Pearson's correlation. After computing the covariance of the returns and dividing by the product of their standard deviations, the correlation coefficient is approximately 0.66.

Exhibit 7-1 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

Exhibit 7-1
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)