Suppose the following table was generated from a sample of 20 CEOs relating annu

Question

Suppose the following table was generated from a sample of 20 CEOs relating annual salary to years of experience and the industry in which they are employed. Indicator (dummy) variables were created for each industry (= 1 if the CEO works in that industry, = 0 otherwise). The Health Care industry is considered the base-level industry.

                      Coefficients Standard Error t Stat P-Value

Intercept 127166.231639 3911.342741 32.512168 0.000000

Experience 3695.659038 168.686407 21.908458 0.000000

Service 14417.580807 3863.323838 3.731911 0.002004

Financial 11832.660238 3939.179767 3.003839 0.008903

Manufacturing 16734.099097 3920.498552 4.268360 0.000673

According to the results, if a CEO in the Health Care industry and a CEO in the Service industry both have 7 years of experience, what is the estimated difference in annual salary between the two CEOs? Enter your answer below, rounded to 2 decimal places.

Answer: $

Explanation / Answer

Estimated annual salary for CEO in the service industry is

salary' = 127166.231639 + 3695.659038 *7 + 14417.580807*1 = 167453.425712

Estimated annual salary for CEO in the manufacturing industry is

salary' = 127166.231639 + 3695.659038 *7 + 16734.099097*1 = 169769.944002

So estimated difference is

$169769.944002 - $167453.425712 = $2316.51829

Answer: $2316.52

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