Executive compensation has risen dramatically compared to the rising levels of an average worker’s wage over the years.

Sarah is an MBA student who decides to use her statistical skills to estimate the mean CEO compensation in 2010 for all large companies in the United States. She takes a random sample of six CEO compensations.

FirmCompensation (in $ millions)

Intel..........8.20

Coca-Cola........2.76

Wells Fargo.......6.57

Caterpillar........3.88

McDonald’s.......6.56

U.S. Bancorp.......4.10

a. How will Sarah use the above information to provide the 90% confidence interval for the mean CEO compensation of all large companies in the United States?

b. What assumption did Sarah make for deriving the interval estimate?

c. How can Sarah reduce the margin of error reported in the above interval estimate?