1. [Total - 25 points] Suppose you are interested in the relationship between ceo compensation, measured by the total compensation of a CEO, and company performance, measured by the return on equity of the company. a. [5 points] Do you expect the relationship to be positive or negative? Why? b. [5 points] You use the univariate regression model: Performance, = [6'0 + 31 Compensation, + 5,, where Performance, is the ROE of the company, and Compensatio'ni is the compensation received by the CEO of the company. You estimate the model using an OLS regression. Do you think it is likely 5101.5 is biased? Why? c. [5 points] Based on your previous answer, do you expect an upward or a downward bias? Explain. d. [10 points] Suppose you estimate the regression using a random sample of US companies data with 767 observations, where blOLS = 0 .67 and the corresponding standard error is 0.36. Test whether the relationship is statistically significant at the 10%, 5% and 1%. [Write the test formally, the test statistics, dene the rule, and conclude]