Question

An economist is trying to understand whether there is a strong link between CEO pay ratio...

An economist is trying to understand whether there is a strong link between CEO pay ratio and corporate revenue. The economist gathered data including the CEO pay ratio and corporate revenue for 30 companies for a particular year. The pay ratio data is reported by the companies and represents the ratio of CEO compensation to the median employee salary. The data are provided below. Use Excel to calculate the correlation coefficient r between the two data sets. Round your answer to two decimal places.

CEO Pay Ratio   Corporate Revenue (million $)
275   151007
293   20612
980   29498
336   39286
255   20338
181   25991
315   98334
131   36196
279   63827
224   60328
256   26675
90   25175
356   53525
1407   20764
220   17494
177   64190
316   45760
335   17476
126   33467
288   20142
267   63580
276   22302
137   20094
2433   20430
223   20867
1292   19183
164   22079
145   20478
226   34635
141   27072

Provide your answer below:

r=___

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Answer #1

Correlation coefficient

To solve the problem we first put the data in Excel.

Then we use CORREL function to compute the correlation coefficient.

So we get that r= -0.17 (rounded to two decimal places).

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