Interest rates and mortgages Since 1985, average mortgage interest rates have fluctuated

Chapter 6, Problem 36

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Interest rates and mortgages Since 1985, average mortgage interest rates have fluctuated from a low of under 6% to a high of over 14%. Is there a relationship between the amount of money people borrow and the interest rate thats offered? Here is a scatterplot of Mortgage Loan Amount in the United States (in thousands of dollars) versus Interest Rate at various times over the past 26 years. The correlation is -0.86. a) Describe the relationship between Mortgage Loan Amount and Interest Rate. b) If we standardized both variables, what would the correlation coefficient between the standardized variables be? c) If we were to measure Mortgage Loan Amount in hundreds of dollars instead of thousands of dollars, how would the correlation coefficient change? d) Suppose in another year, interest rates were 11% and mortgages totaled $250 thousand. How would including that year with these data affect the correlation coefficient? e) Do these data provide proof that if mortgage rates are lowered, people will take out larger mortgages? Explain