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 increase for company	19	20	27	12	5	7	30	6
A: Percent increase for CEO	11	22	30	5	7	2	27	1

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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? Assume that the distribution of differences is approximately normal, mound-shaped and symmetric. Use a 10% level of significance. What is α?

Answer 1

We use paired t test

The null and alternative hypothesis

Test statistic

where

Calculation

B	A	d=B-A
19	11	8
20	22	-2
27	30	-3
12	5	7
5	7	-2
7	2	5
30	27	3
6	1	5
		21

sd = 4.37

t= 1.698

df =7

P value = 0.1333

P value >

We fail to reject H0

There is not sufficient evidence to conclude that mean percentage increase in corporate revenue is different from population mean percentage increase in CEO salary