The given data represent the total compensation for 10 randomly selected CEOs an
ID: 3307347 • Letter: T
Question
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 r=0.2119.
What would be the predicted stock return for a company whose CEO made $15 million? What would be the predicted stock return for a company whose CEO made $25 million?
CEO Compensation and Stock Performance Compensation (millions of dollars) Stock Return(%) 26.59 12.21 19.72 13.22 12.28 12.06 26.56 14.54 17.62 13.97 6.39 30.85 31.54 79.63 8.01 2.74 4.66 11.14 4.24 11.54 PrintExplanation / Answer
Since the critical value of correlation cofficient is greater than the calculated value, there is no significant correlation between compensation and stock return. Hence,
Predicted stock returns for CEO who made $15 million
= Predicted return for CEO who made $25 million
= Average of stock returns given
= 17.472% [Please round it off as per the question demands]
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