A study of the pay of CEOs examined the raise in cash compensation of CEOs of 104 companies, adjusted for inflation, in recent year. The mean raise in real compensation was M=5.8 percent. Assume it is known that the standard deviation of raises in population is 6.8 percent. Is the current sample 104 CEOs good indication that the mean real compensation, ?, of all CEOs increased significantly that year?
The hypotheses are:
H0: ?=0 (no increase)
Ha: ?>0 (an increase)
a. Sketch the normal curve for the sampling distribution of sample means when the null is true. Shade area that represents the p-value for the observed outcome (6.8% increase) (3pts)
b. Compute the p-value (1pt)
c. Is the result significant at the 0.05 level (1pt)? Do you think the study provides good evidence that the mean compensation of CEOs went up (1pt)?