Which Correlation Coefficient Indicates the Strongest Relationship

question 34

Multiple Choice

Which correlation coefficient indicates the strongest relationship?

• A) 0.00
• B) +0.50
• C) -0.70
• D) +0.60

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Definitions:

Compounded Annually

Refers to the process whereby the interest earned on an investment is added to the principal at the end of each year, and the following year's interest calculation includes the added interest from the previous year.

Annual Interest Rate

The percentage of principal charged by the lender for the use of its money expressed as an annual rate.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan balance.

Discount Rate

The interest rate that a central bank charges financial institutions for short-term loans, or the rate used in discounted cash flow analysis to determine the present value of future cash flows.