Interest rates and mortgages. Since 1980, averagemortgage

Chapter 7, Problem 32

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Interest rates and mortgages. Since 1980, averagemortgage interest rates have fluctuated from a low of un-der 6% to a high of over 14%. Is there a relationship be-tween the amount of money people borrow and the inter-est rate thats offered? Here is a scatterplot of TotalMortgages in the United States (in millions of 2005 dollars)versus Interest Rate at various times over the past 26years. The correlation is -0.84.a) Describe the relationship between Total Mortgages andInterest Rate.b) If we standardized both variables, what would thecorrelation coefficient between the standardized vari-ables be?c) If we were to measure Total Mortgages in thousands ofdollars instead of millions of dollars, how would thecorrelation coefficient change?d) Suppose in another year, interest rates were 11% andmortgages totaled $250 million. How would includ-ing that year with these data affect the correlationcoefficient?e) Do these data provide proof that if mortgage ratesare lowered, people will take out more mortgages?Explain.