Compensation (millions of dollars) |
Stock Return (%) |
|
---|---|---|
26.81 |
5.58 | |
12.82 |
30.26 | |
19.64 |
31.47 | |
13.14 |
79.88 |
|
12.37 |
-8.24 | |
12.07 |
2.82 | |
25.87 |
4.39 | |
14.86 |
10.88 | |
17.16 |
4.26 | |
14.63 |
11.98 |
The given data represent the total compensation for 10 randomly selected CEOs and their company's stock performance in 2009. Analysis of this data reveals a correlation coefficient of
requals=negative 0.2209−0.2209.
What would be the predicted stock return for a company whose CEO made $25 million?
From the provided information, the table can be made as:
The slope and intercept can be
obtained as:
The equation of regression line is as follow:
For a company whose CEO made $25 million the stock return can
be calculated as:
Thus, the stock return is 9.15%.
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