CIMA BA1 · Chapter 11 · Question 2 of 11
The correlation coefficient between advertising spend and sales is 0.8. What proportion of the variation in sales is explained by the variation in advertising spend?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) 64%
Explanation
The coefficient of determination is r squared = 0.8 x 0.8 = 0.64. So 64% of the variation in sales is explained by the variation in advertising; the remaining 36% is due to other factors.
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