Question

Question:

The accompanying data represent the total compensation for 12 randomly selected chief executive officers​ (CEO) and the​ company's stock performance in a recent year. Complete parts​ (a) through​ (d) below.

Company          Compensation ($mil)    Stock Return (%)

Company A                    14.58                               75.45

Company B                    4.07                                63.99

Company C                    7.08                                142.06

Company D                    1.07                                32.69

Company E                     1.98                                10.68

Company F                     3.79                                30.69

Company G                    12.07                              0.72

Company H                    7.56                                69.43

Company I                      8.47                                 58.75

Company J                     4.05                                55.95

Company K                     20.85                             24.33

Company L                     6.66                                32.25

​(a) One would think that a higher stock return would lead to a higher compensation. Based on​ this, what would likely be the explanatory​ variable?Compensation or Stock return

​(b) Draw a scatter diagram of the data. Use the result from part​ (a) to determine the explanatory variable.

​(c) Determine the linear correlation coefficient between compensation and stock return.

r =         

​(Round to three decimal places as​ needed.)

​(d) Does a linear relation exist between compensation and stock​ return? Does stock performance appear to play a role in determining the compensation of a​ CEO?

The linear correlation coefficient is close to 1, -1, OR 0, so NO, A POSTIVE OR A NEGATIVE linear relation exists between compensation and stock return. It appears that stock performance plays NO, A POSTIVE OR A NEGATIVE role in determining the compensation of a CEO.

Answer 1

a) Stock performance is the explanatory variable here

b)

Points are scattered and no specific relation is found between the variables

c)

d) The correlation coefficient is -0.03 which is almost near to zero. There exist no linear relationship between variables as the correlation coeffiicient is almost near to 0. So it appears that stock performance plays no role in determining the compensation of CEO