Class 2 Individual Assignment: General Instructions

Class 2
Individual Assignment
General instructions
• This assignment is covered under the Honor Code of the Fuqua School of Business at Duke University.
• This assignment is due by the deadline listed on the course website. Except for the submission deadline,
there is no time limit to complete the assignment.
• This is an individual assignment. The work for this assignment is to be your work alone, without
consultation or assistance from any other person.
• This assignment is open books and open notes. You can only access the material that is intended
for this course and that is made available through the course website and the course packet, as well
as your notes. You are not permitted to obtain any course materials (including handouts, readings,
assignments, etc.) or any solutions from other Fuqua students or any other source.
• You may use a laptop in performing calculations. However, when requested by the question, you are
expected to inlcude intermediate steps as well as references to the formulas used.
• When your are done working on your assignment, make sure to submit your responses by clicking on
the “Submit” button. Answers without submission are not recorded.
• You can submit your answers as many time as you wish before the deadline. Only your last submission
will be graded. Please, keep in mind that when you decide to take the assignment more than one
time, your previous answers will be deleted and no answer will be recorded until you submit your new
responses.
• Late or missing submissions will receive no credit.
• The questions that are worth 0 points will not be graded for correctness. However, you are strongly
encouraged to answer them as they might be relevant for later questions and/or for the in-class dis-
cussion.
• Multiple choice questions: read them carefully. Only one answer is correct. You are not to provide
any reasoning on why you selected a particular choice.
• Multiple answer questions: you will get points for each correct selection and negative points for each
incorrect selection.
• Numeric answer questions: make sure to enter only numeric values with a point on the line as the
decimal separator (e.g. you must enter 0.2 and not 0,2 or other variations).
• File upload questions: the number and type of files for upload might be limited as specified by each
question. No other upload is allowed. Please, keep in mind that the updloaded file(s) must detail your
work and the process you followed to reach your answer.
S&P1500 CEO Annual Compensation Data
The data file CEOCompensation Data contains data on the total annual compensation of CEOs of S&P1500
companies, as reported in SEC filings. The compensation is recorded in million of US dollars, rounded to
the nearest million.
Part I: summarizing data.
1. (1 point) Is the average CEO compensation smaller than, equal to, or larger than the median CEO
compensation?
The average CEO compensation is smaller than the median CEO compensation
The average CEO compensation is equal to the median CEO compensation
The average CEO compensation is larger than the median CEO compensation
2. (1 point) What is the standard deviation of the CEO compensation (in million of US dollars)?
3. (1 point) What is the proportion of CEOs whose annual compensation is $5M? (Hint. First compute
how many CEOs in the dataset have annual compensation equal to $5M.)
Less than or equal to 0.15 (15%)
Greater than 0.15 but less than or equal to 0.30 (15% – 30%)
Greater than 0.85 (85%)
4. (1 point) What is the proportion of CEOs whose compensation is less than or equal to $5 million?
Part II: from data to a random variable. A succinct way to represent a large dataset is with a frequency
table, which reports the frequencies of each value in the dataset. The following instructions will help you
build a frequency table for the CEO compensation data and connect it with probability distributions. To
create the frequency table, please follow the following steps
(i) Identify the range of CEO compensation.

Note that the CEO compensation values are integers ranging from 0,1,. . . , 246, and enter
these values in a new worksheet in, say, column A. (There are multiple ways to do this. For
instance, you could type in 0 in cell A2, type 1 in cell A3, highlight both cells A2 and A3 and
then drag the bottom right corner until row 248.)
(ii) Use the COUNTIF function to calculate the frequency of each value.
In cell B2 write =COUNTIF(CEOData!C$2:C$1479,A2) and then double-click on the bottom
right corner to compute the frequency for the rest of the values. You can check that all
data entries are properly accounted for by computing the sum of all of the frequencies and
making sure that it equals 1478. To do this you can type =SUM(B2:B248) in a new cell and
observe whether it matches the number of data entries.
(iii) Compute the proportion of each unique value.
To obtain the proportion of data entries for each unique value, note that there are 1478
entries in the dataset and write =B2/1478 in cell C2. You can then double-click on the bottom
right corner to compute the proportion for the rest of the values. Calculate =SUM(C2:C248)
in a new cell to check that all of the proportions add up to 1.
(iv) Visualize the data.
To visualize the data, you can now add a chart by selecting columns A and C (or just selecting
cells A2:A248 and C2:C248), and then choosing from the Column Chart icon on the Insert
ribbon.
Page 2
Now consider a S&P 1500 CEO who is about to be invited to speak at a business school graduation
next year. This CEO’s annual compensation is a random variable: it is a numerical value which is uncertain
because the identity of that CEO is not known. Formally, we denote
X = Annual compensation of the graduation speaker CEO.
Note that random variable X can take on any integer value between 0 and 246 (see column A), and the
probabilities for each possible value of X are the ones we computed in column C. Thus, the frequency table
approach allows us to use the collected data to construct a probability distribution.
5. (1 point) Calculate the standard deviation of the random variable X (in million of US dollars).
6. (2 points) What is P (X > 5)?
Part III: sum of random variables.
7. (0 points) Four business schools independently plan to invite a S&P1500 CEO to be their graduation
speaker. What is the expected value of the average of the annual compensations of the CEOs speaking
at graduation at these four schools?
(Hint. Let X1 be the random variable that denotes the compensation of the CEO speaking at the first
school, X2 be the random variable that denotes the compensation of the CEO speaking at the second
school, and X3 and X4 , respectively be the random variables of the CEOs speaking at the third and
fourth school. The question is asking to consider the random variable
X1 + X2 + X3 + X4
X= ,
4
which represents the average compensation of four CEO graduation speakers, and compute its expected
value.)
8. (0 points) What is the standard deviation of that average? (Hint. What is the standard deviation of
the random variable X defined earlier?)
Sampling New York City yellow cab data

Open the data file YellowCab TripData Sample to obtain a sample of n = 100 New York City Yellow cab
trip records. Your sample is selected at random from the dataset of all New York City Yellow cab trip annual
records maintained by the New York City Taxi & Limousine Commission.
To visualize your sample, enter your unique sample code in cell D2 of the worksheet
Sample. Your unique sample code is available in your Canvas gradebook for this
course.
9. (1 point) What is your unique sample code from Gradebook? (Hint. Your unique sample code is
available in your Canvas gradebook for this course.)
10. (2 points) What is the average price of a yellow cab ride in your sample?
Page 3

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What is the average and standard deviation of CEO compensation according to the data provided?

What proportion of CEOs have a compensation of $5M or less?

Class 2

Part I: summarizing data.

(i) Identify the range of CEO compensation.

X = Annual compensation of the graduation speaker CEO.

6. (2 points) What is P (X > 5)?

Part III: sum of random variables.

Sampling New York City yellow cab data

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