CMA Foundation · Fundamentals of Business Mathematics and Statistics · Correlation and Regression
The coefficient of correlation between advertising spend and sales for a Pune firm is 0.8. What is the coefficient of determination?
The coefficient of determination is the square of the correlation coefficient, so 0.8 squared gives 0.64. It means 64 percent of the variation in sales is explained by variation in advertising spend, and the remaining 36 percent is due to other factors.
- A0.64Correct
- B0.80
- C0.36
- D0.20
Explanation
The coefficient of determination is r squared, so 0.8 × 0.8 = 0.64. This means 64% of the variation in sales is explained by advertising spend. Option 0.80 is wrong because it just repeats r without squaring.
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