Question

ASSINE Meula Question Help The accompanying data represent the total compensation for 12 randomly selected chief executive officers (CEO) and the company's stock performance in a recent year. Complete parts (a) through (d) below. B: Click the icon to view the CEO data (a) One would think that a higher stock return would lead to a higher compensation. Based on this, what would likely be the explanatory variable? Stock return O Compensation (b) Draw a scatter diagram of the data. Use the result from part (a) to determine the explanatory variable. Choose the correct graph below. OA OB OD. 160- 160- 25 Stock Return Stock Retur Compensation . 160 Compensation Compensation 160 Stock Return Stock Return (c) Determine the linear correlation coefficient between compensation and stock return = (Round to three decimal places as needed.) Enter your answer in the answer box and then click Check Answer part remaining Clear All Check Answer

Answer 1

Q) The accompanying data represent the total compensation for 12 randomly selected chief executed officers (CEO) and the company’s stock performance in recent year.

Company	Compensation ($ mil)	stock return(%)
Company A	14.56	75.43
Company B	4.12	64.02
Company C	7.06	142.03
Company D	1.07	32.75
Company E	1.93	10.64
Company F	3.78	30.66
Company G	12.06	0.74
Company H	7.55	69.41
Company I	8.84	58.68
Company J	4.07	55.94
Company K	20.87	24.26
Company L	6.67	32.33

Answer:

a) One would think that a higher stock return would lead to a higher compensation. Based on this, what would likely be the explanatory variable?

Here Compensation ($ mil) is depend on the stock return (in %). So, the dependent variable is Compensation ($ mil) and explanatory variable (independent variable) is stock return.

The explanatory variable is Stock return

b) Draw scatter plot of the data. Use the result of part (a) to determine the explanatory variable.

The explanatory variable (independent variable) is stock return (in %)  and the dependent variable is Compensation ($ mil). Hence the correct scatter plot of Stock return and compensation is bellow

The answer is (C)

Scatter plot of stock return vs Compensation 25 20 15 Compensation($ mil) 10 5 . 0 0 20 40 120 140 160 60 80 100 Stock returns(%)

(C) Determine the linear correlation between compensation and stock returns.

The linear correlation between compensation and stock returns is -0.029.

That is, r = -0.029.

Explanation:

The correlation between compensation and stock netuon can be calculated by wing following formula (ory (x, y) = COV(X,Y) 11 X :- Stock Return. - compensation Where, Covly, y) = į Exiy; - X Y 6x=5.D(x) h Exp²-7² y = S.D(P) = ħ Ž ; ² - 72 By using given data (Gusing excel function COV(x,y) = -5.621 and 8x=s.d(stock Return) = 35.84 rys (compensation) = 5:48 Therefore, corol (X,Y)= -5.621 35.84 (5:48) Coon (XY). -0.02859 =-0.029 -0029 The correlation is negative and it is close to zero. It means there no correlation between compensation and stock retum