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	14.5514.55		75.4475.44
Company B	4.094.09		64.0464.04
Company C	7.127.12		142.09142.09
Company D	1.051.05		32.6932.69
Company E	1.971.97		10.6610.66
Company F	3.723.72		30.6130.61
Company G	12.0112.01		0.720.72
Company H	7.567.56		69.4569.45
Company I	8.438.43		58.7558.75
Company J	4.044.04		55.9855.98
Company K	20.9220.92		24.2924.29
Company L	6.696.69		32.2132.21

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? choose one.

o Compensation

o Stock return

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

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

​(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?

Answer 1