Chapter 4.1, Problem 36E

Mortgage payments: The following table presents monthly interest rates, in percent, for 30-year and 15-year fixed-rate mortgages, for a recent year.

1. Construct a scatterplot of the 15-year rate (y) versus the 30-year rate (x).
2. Compute the correlation coefficient between 30-year and 15-year rates.
3. When the 30-year rate is below average, would you expect the 15-year rate to be above or below average? Explain.
4. Which of the following is the best interpretation of the correlation coefficient?
5. When a bank increases the 30-year rate: that causes the 15-year rate to rise as well.
6. Interest rates are determined by economic conditions. economic conditions cause 30-year rates to these same conditions cause 15 -year rates to increase as well.
7. When a bank increases the 15-year rate, that causes the 30-year rate to rise as well.