It is desired to estimate the average total compensation of CEOs in the Service

Question

It is desired to estimate the average total compensation of CEOs in the Service industry. Data were randomly collected from 18 CEOs and the 97% confidence interval was calculated to be ($2,181,260, $5,836,180). Based on the interval above, do you believe the average total compensation of CEOs in the Service industry is more than $3,000,000?

a) Yes, and I am 97% confident of it. b) Yes, and I am 78% confident of it. c) I am 97% confident that the average compensation is $3,000,000. d) I cannot conclude that the average exceeds $3,000,000 at the 97% confidence level.

Explanation / Answer

It is desired to estimate the average total compensation of CEOs in the Service industry. Data were randomly collected from 18 CEOs and the 97% confidence interval was calculated to be ($2,181,260, $5,836,180). Based on the interval above, do you believe the average total compensation of CEOs in the Service industry is more than $3,000,000?

a) Yes, and I am 97% confident of it.

b) Yes, and I am 78% confident of it.

c) I am 97% confident that the average compensation is $3,000,000.

d) I cannot conclude that the average exceeds $3,000,000 at the 97% confidence level.

Answer is d. I cannot conclude that the average exceeds $3,000,000 at the 97% confidence level.

97% confidence interval includes $3,000,000 in the interval . so we cannot conclude that the average exceeds $3,000,000 at the 97% confidence level.

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