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Question: using the following 5 year data series calculate the correlation...

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Using the following 5 year data series, calculate the correlation between interest rates and US new home sales.

Year Home sales (thousands) Interest rate (%)
1 605 9
2 554 9
3 524 4
4 605 4
5 508 10

the correct answer is :

0.196

Hint: Use the definition of correlation to calculate the result. Some useful intermediate values would be the means of the two variables, their covariance, and their standard deviations.

Double check your results with spreadsheet functions COVARIANCE.S, VAR.S, CORREL. please show the work on excel. Thank you.

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