Question

The issues surrounding the levels and structure of executive compensation have gained added prominence in the wake of the financial crisis that erupted in the fall of 2008. Based on the 2006 compensation data obtained from the Securities and Exchange Commission (SEC) website, it was determined that the mean and the standard error of compensation for the 418 highest paid CEOs in publicly traded U.S. companies are $8.63 million and $8.18 million, respectively. An analyst randomly chooses 38 CEO compensations for 2006. [You may find it useful to reference the z table.]

Calculate the expected value and the standard error of the sample mean. (Round "expected value" to 2 decimal places and "standard error" to 4 decimal places.)

d. What is the probability that the sample mean is more than $10 million? (Round "z" value to 2 decimal places, and final answer to 4 decimal places.)

Answer 1

According to the given question, the issues surrounding the levels and structure of executive compensation have gained added prominence in the wake of the financial crisis that erupted in the fall of 2008. Based on the 2006 compensation data obtained from the Securities and Exchange Commission (SEC) website, it was determined that the mean and the standard error of compensation for the 418 highest paid CEOs in publicly traded U.S. companies are $8.63 million and $8.18 million, respectively.

Therefore the and mean and the standard  error  

c) An analyst randomly chooses 38 CEO compensations for 2006 , therefore the expected value and the standard error of the sample mean is determined as:

Expected value the sample mean:

and the standard error of the sample mean:

  

d. Therefore the  probability that the sample mean is more than $10 million is determined as:

  

Therefore  the probability that the sample mean is more than $10 million is

The area under the standard normal curve is determined as: