Question

Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose that a random sample of companies yielded the following data: B: Percent for company 21 11 16 20 5 8 4 22 A: Percent for CEO 18 5 14 22 10 12 1 17 Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Use a 1% level of significance. What is the value of the test statistic? Select one: a. -0.730 b. -0.683 c. 0.683 d. 0.730 e. -0.639

Answer 1

It is apparent that the two variables(row B and row A) are related to each other. Thus test statistic used will be paired t-test given by

where d are the deviations of entries in row B subtracted by entries in row A.

After calculations, it comes out that the value of the test statistic is 0.683

Since the tabulated value at a 1% level of significance with 7 degrees of freedom is 3.5 which is greater than 0.683 thus we conclude that the data "does not" indicate that population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary

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