Question

In this problem, assume that the distribution of differences is approximately normal. Note: For degrees of freedom d.f. not in the Student's t table, use the closest d.f. that is smaller. In some situations, this choice of d.f. may increase the P-value by a small amount and therefore produce a slightly more "conservative" answer.

Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose a random sample of companies yielded the following data:

B: Percent increase for company	22	6	12	18	6	4	21	37
A: Percent increase for CEO	25	27	26	14	-4	19	15	30

Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Use a 5% level of significance. (Let d = B ? A.)

(a) What is the level of significance?


State the null and alternate hypotheses.

H₀: ?_d = 0; H₁: ?_d < 0H₀: ?_d > 0; H₁: ?_d = 0     H₀: ?_d ? 0; H₁: ?_d = 0H₀: ?_d = 0; H₁: ?_d > 0H₀: ?_d = 0; H₁: ?_d ? 0

(b) What sampling distribution will you use? What assumptions are you making?

The Student's t. We assume that d has an approximately normal distribution.The Student's t. We assume that d has an approximately uniform distribution.     The standard normal. We assume that d has an approximately uniform distribution.The standard normal. We assume that d has an approximately normal distribution.

What is the value of the sample test statistic? (Round your answer to three decimal places.)


(c) Find the P-value. (Round your answer to four decimal places.)


Sketch the sampling distribution and show the area corresponding to the P-value.

(d) Based on your answers in parts (a) to (c), will you reject or fail to reject the null hypothesis? Are the data statistically significant at level ??

Since the P-value ? ?, we reject H₀. The data are statistically significant.Since the P-value > ?, we fail to reject H₀. The data are not statistically significant.     Since the P-value > ?, we reject H₀. The data are not statistically significant.Since the P-value ? ?, we fail to reject H₀. The data are statistically significant.

(e) Interpret your conclusion in the context of the application.

Reject H₀. At the 5% level of significance, the evidence is sufficient to claim a difference in population mean percentage increases for corporate revenue and CEO salary.Fail to reject H₀. At the 5% level of significance, the evidence is insufficient to claim a difference in population mean percentage increases for corporate revenue and CEO salary.     Fail to reject H₀. At the 5% level of significance, the evidence is sufficient to claim a difference in population mean percentage increases for corporate revenue and CEO salary.Reject H₀. At the 5% level of significance, the evidence is insufficient to claim a difference in population mean percentage increases for corporate revenue and CEO salary.

Answer 1

(a) What is the level of significance?

Level of significance = = 0.05

State the null and alternate hypotheses.

Here we want to test the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary. So the correct option is

H₀: ?_d= 0; H₁: ?_d ? 0

(b) What sampling distribution will you use? What assumptions are you making?

The Student's t. We assume that d has an approximately normal distribution

Because population standard deviation are not given.

What is the value of the sample test statistic? (Round your answer to three decimal places.)

Let's use minitab:

Let's used minitab:

Enter the given data set in minitab columns

Steps 1) Click on Stat>>>Basic Statistics>>>2-Sample t...

Steps 2) Click on sample in different columns

look the following picture.

then click on OK again click on OK

So we get the following output

From the above output the t test statistic value is

t = 0.589

c) P -value = 0.5653

d)

Decision rule:

1) If p-value < level of significance (alpha) then we reject null hypothesis

2) If p-value > level of significance (alpha) then we fail to reject null hypothesis.

Here p value = 0.5653 > 0.05 so we used 2nd rule.

That is we fail to reject null hypothesis

Since the P-value > ?, we fail to reject H0. The data are not statistically significant.

(e) Interpret your conclusion in the context of the application.

Fail to reject H0. At the 5% level of significance, the evidence is insufficient to claim a difference in population mean percentage increases for corporate revenue and CEO salary.