Question 4

A bank wanted to find out whether the number of loan applications received are influenced by the current loan interest rate. The manager selected 12 monthly periods for which different interest rates applied and recorded the number of loan applications received.

Interest rate (%)		Number of Loan applications
14		36
13		44
11		60
12		48
16		32
17		36
12		56
13		54
15		40
16		34
12		42
18		40

Identify the independent variable and the dependent variable. [2]

What is regression analysis? What is correlation analysis? [4]

(b) Calculate the correlation coefficient between the rate of interest and the number of loan applications received. Comment on the strength of the association. Show working [14]