Question

The accompanying data represent the total compensation for 12 randomly selected chief executives officers(CEO) and the company's stock performance in a recent year

Company Compensation($mil)Stock Return(%)

Company A 14.56 75.49

Company B 4.09 63.96

Company C 7.07 142.03

Company D 1.04 32.66

Company E 1.91 10.63

Company F 3.76 30.69

Company G 12.03 0.78

Company H 7.63 69.43

Company I 8.47 58.66

Company J 4.06 55.91

Company k 20.92 24.31

Company L 6.67 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

_____ 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)

(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 ( 0, -1, or 1) so ( a negative, a positive or No)linear relation exists between compensation and stock return. It appears that stock performance plays( No, a positive or a negative)role in determining the compensation of a CEO.

Answer 1