Question

General Random Variable A manager in a medium sized company wants to construct an incentive compensation...

  1. General Random Variable

A manager in a medium sized company wants to construct an incentive compensation program that equitably and consistently compensates employees on the basis of performance. He decides to offer an annual bonus of $10,000 for superior performance, $6,000 for good performance, $3,000 for fair performance, and no bonus for poor performance. Based on prior performance reviews, he expect 15% of his employees to be superior performers, 25% to be good performers, 40% to be fair performers, and 20% to be poor performers.

  1. What would the probability distribution table for the bonuses look like, if this year’s performance of employees is comparable to the past performance?
  1. What is the chance a randomly selected employee would get a non-zero bonus amount?

  1. What is the chance a randomly selected employee would get at least $6000?

  1. What is the expected bonus value of the bonus amounts?
  1. What are the variance and standard deviation of the bonus amount?

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