Question: Health Insurance: Administrative Cost

The following data are based on information from Domestic Affairs Let x be the average number of employees in a group health insurance plan, and let y be the average administrative cost as a percentage of claims.

x 3 7 15 35 75

y 40 35 30 25 18

a.) Make a scatter diagram and draw the line you think best fits

data.

b.) Would you say the correlation is low, moderate, or strong?

Positive or negative?

c.) Use a calculator to verify that Ex = 135, Ex ² = 7133,

Ey = 148, Ey ² = 4674, and Exy = 3040. Compute r. As x

Increases, does the value of r imply that y should tend to

increase or decrease? Explain.

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