The given data represent the total compensation for 10 randomly selected CEOs an
ID: 3044408 • 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=0.2183. 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?
What would be the predicted stock return for a company whose CEO made $15 million? ***rounded one decimal place****
What would be the predicted stock return for a company whose CEO made $25 million, rounded to one decimal place****
Compensation
(millions of dollars)
Stock
Return (%)
26.83
5.57
12.98
30.37
19.49
31.53
13.46
79.68
12.56
8.17
12.14
2.69
26.53
4.22
15.28
11.26
17.71
4.03
13.93
11.38
Compensation
(millions of dollars)
Stock
Return (%)
26.83
5.57
12.98
30.37
19.49
31.53
13.46
79.68
12.56
8.17
12.14
2.69
26.53
4.22
15.28
11.26
17.71
4.03
13.93
11.38
Explanation / Answer
SOlution:
take X as compenstaion
and Ya s stock return.
Linear regression eq
stock return =a+b(compenstaion)
a=y intercept
b is slope
Perform linear regression in R
code is:
compensation <- c(26.83,12.98,19.49,13.46,12.56,12.14,26.53,15.28,17.71,13.93)
stockreturn <- c(5.57,30.37,31.53,79.68,-8.17,2.69,4.22,11.26,4.03,11.38)
print(compensation)
print(stockreturn)
rmod1 <- lm(stockreturn~compensation)
coefficients(rmod1)
cor(stockreturn,compensation)
output:
Intercept) compensation
34.1100757 -0.9861375
> cor(stockreturn,compensation)
[1] -0.2182951
Regresison eq is
stockreturn= 34.1100757-0.9861375(compensation)
What would be the predicted stock return for a company whose CEO made $15 million
x=15
stockreturn= 34.1100757-0.9861375(compensation)
= 34.1100757-0.9861375(15)
=19.31801
=19.3
answer:19.3
What would be the predicted stock return for a company whose CEO made $25 million?
x=25
stock return =34.1100757-0.9861375*(25)
=9.456638
=9.5
ANSWER:9.5
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