Question12.3 Performing Linear Regressions with Technology
1. An economist is trying to understand whether there is a strong link between CEO pay ration and corporate revenue. The economist gathers data, including the CEO pay ratio and the corporate revenue for 10 companies for a particular year. The pay ratio data is reported by the companies themselves and represents the ratio of CEO compensation to the median employee salary. The data has been reproduced in the table below. Corporate Revenue (million \$)
\begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|}
\hline CEO & 286 & 944 & 321 & 268 & 183 & 309 & 132 & 264 & 236 & 259 \\
\hline Revenue & 21,973 & 29,846 & 38,507 & 18,912 & 25,947 & 97,023 & 35,888 & 59,131 & 60,579 & 27,242 \\
\hline
\end{tabular}
a) What is the equation of the line of best fit?
b) What is "r "and determine if it is a strong, moderate, or weak correlation.
Studdy Solution
Interpret the value of to determine the strength of the correlation:
- If is close to 1, the correlation is strong.
- If is around 0.5, the correlation is moderate.
- If is close to 0, the correlation is weak.
The equation of the line of best fit and the correlation coefficient will be provided by the technology used for linear regression. Please input the data into your chosen technology to obtain these results.
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