in a sample of 1702 companies from year 2000, there are 878 companies that pay a
ID: 3204474 • Letter: I
Question
in a sample of 1702 companies from year 2000, there are 878 companies that pay a stock dividend to its shareholders, there are 1253 companies that pay their CEO's over $1 million in total compensation, and there are 673 firms that pay a dividend and pay their CEO's over $1 million in total compensations. the following table describes this joint distribution
dividend Not Dividend Total
over $1 million 673 205 878
Not over $1 million 580 244 824
Total 1253 449 1702
When testing the hypothesis (using 5% level of significance) that the compensation of the CEO and whether the company pays a dividend are independent,
a. what is the test statistic?
b. what is the critical value?
Explanation / Answer
2 = 8.586, df = 1, 2/df = 8.59 , P(2 > 8.586) = 0.0034
expected values are displayed in italics
individual 2values are displayed in (parentheses)
Since p - value is lessthan 0.05, the company pays a dividend are independent
Dividend Not Dividend Over 1 million 673
646.38
( 1.10) 205
231.62
( 3.06) 878 Not over 1 million 580
606.62
( 1.17) 244
217.38
( 3.26) 824 1253 449 1702
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