ACCA PM · Chapter 11 · Question 8 of 10
The correlation coefficient between advertising spend and sales volume has been calculated as 0.9. What proportion of the variation in sales volume is explained by variation in advertising spend?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 81%
Explanation
The coefficient of determination equals r squared = 0.9 x 0.9 = 0.81. Therefore 81% of the variation in sales volume is explained by the variation in advertising spend; the remaining 19% is due to other factors.
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