They calculate a Point-Biserial Correlation . This tells them the strength of the relationship between hours studied and the actual binary outcome of passing or failing.
Use this when the binary variable is "true"—like being a "smoker" vs. "non-smoker". The Biserial Path biserial correlation
Dan suggests they just use the data as it is: a hard line between those who passed and those who didn't. They assign "1" to Pass and "0" to Fail. They calculate a Point-Biserial Correlation
Clara loves precision. She tracks the students spend studying (a continuous variable). Dan, however, is only interested in the final result: did they Pass or Fail (a dichotomous variable)? biserial correlation