1. Highly publicized salaries of corporate chief executive officers (CEO's) in the US have generated sustained interest in understanding the factors related to CEO compensation in general. The EXCEL sheet contains data on the annual compensation of CEO's of 50 large publicly-traded corporations in the US in the previous year, as well as other information that could be used to predict CEO compensation. An explanation of the entries in EXCEL is as follows: • Column 2 shows the total compensation of the CEO of each company. This number includes direct salary plus bonuses, stock options, and other compensation. Column 3 shows the number of years that the executive has been CEO of the company. • Column 4 shows the percentage change in the stock price of the company from the previous year. • Column 5 shows the percentage change in the company's sales from the previous year. • Column 6 shows information on whether or not the CEO has MBA. A "1" is used to indicate that the CEO has MBA, and "0" is used to indicate that the CEO does not have an MBA. ● a. Comment on the extent to which you think that the data shown in EXCEL sheet might or might not be appropriate choice to use to predict the compensation. b. Construct and run a regression model to predict CEO compensation as a function of the independent variables indicated in EXCEL sheet. c. Evaluate the regression output of your regression model. Is there evidence of multi- collinearity?
