Farmers National Bank issues MasterCard credit cards to its customers. A main factor in determining whether a credit card will be profitable to the bank is the average monthly balance that the customer will maintain on the card that will be subject to finance charges. Bank analysts wish to determine whether there is a relationship between the average monthly credit card balance and the income stated on the original credit card application form. The following sample data have been collected from existing credit card customers:
IncomeCredit Balance
$43,000…………………………….$345
$35,000…………………………..$1,370
$47,000…………………………..$1,140
$55,000…………………………….$201
$55,000………………………………$56
$59,000……………………………..$908
$28,000……………………………$2,345
$43,000……………………………..$104
$54,000……………………………....$0
$36,000…………………………..$1,290
$39,000……………………………$130
$31,000……………………………$459
$30,000………………………………$0
$37,000…………………………$1,950
$39,000…………………………….$24
a. Indicate which variable is to be the independent variable and which is to be the dependent variable in the bank’s analysis and indicate why.
b. Construct a scatter plot for these data and describe what, if any, relationship appears to exist between these two variables.
c. Calculate the correlation coefficient for these two variables and test to determine whether there is a significant correlation at the α = 0.05 level.