Suppose we take logarithms of the CEO compensations in Exercise 47. The histogram of log Compensation looks like this:

with a mean of 1.07 and a standard deviation of 0.26.
a) According to the Normal model, what percent of CEOs would you expect to earn more than 2 standard deviations above the mean compensation?

b) Is that percentage appropriate for these data?
Now let’s draw samples of 30 CEOs from the logged data. We drew 1000 samples and found their means. The distribution of means looks like this:

with a standard deviation of 0.05.
c) Do you think the 68–95–99.7 Rule applies to these means?

Transcribed Image Text:

# of CEOs 80 60 40 20 T 1 0.1 0.6 1.1 Log CEO Compensation 1.6 2.1