. A study of the pay of corporate chief executive officers (CEOs) examined the increase in cash compensation of the CEOs of 104 companies, adjusted for inflation, in a recent year. The mean increase in real compensation was x = 6.9%, and the standard deviation of the increases was s = 55%. Is this good evidence that the mean real compensation μ of all CEOs increased that year? The hypotheses are

H0: μ = 0 (no increase)

Ha: μ > 0 (an increase)

Because the sample size is large, the sample s is close to the population σ, so take σ = 55%.

(a) Sketch the Normal curve for the sampling distribution of x when H0 is true. Shade the area that represents the P-value for

the observed outcome x = 6.9%.

(b) Calculate the P-value.

(c) Is the result significant at the α = 0.05 level? Do you think the study gives strong evidence that the mean compensation of

all CEOs went up?


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