CEOs, revisited In Exercise 42, you looked at the annual compensation for 800 CE

Question

CEOs, revisited In Exercise 42, you looked at the annual compensation for 800 CEOs, for which the true mean and standard deviation were (in thousands of dollars) 10,307.31 and 17,964.62, respectively. A simulation drew samples of sizes 30, 50, 100, and 200 (with replacement) from the total annual compensations of the Fortune 800 CEOs. The summary statistics for these simulations were as follows: According to the Central Limit Theorem, what should the theoretical mean and standard deviation be for each of these sample sizes? How close are the theoretical values to what was observed from the simulation?

Explanation / Answer

a) According to the central limit theorem, the means must be the same as the population mean, and the standard deviation is s/sqrt(n).

Thus, consider the table, as what should be using the central limit theorem:

b)

As we can see, these values are quite close to the table above.

b)

n Mean st. dev. 30 10307.1 3279.876 50 10307.1 2540.581 100 10307.1 1796.462 200 10307.1 1270.29

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