Suppose a mutual fund qualifies as having moderate risk if the standard deviatio
ID: 3160666 • Letter: S
Question
Suppose a mutual fund qualifies as having moderate risk if the standard deviation of its monthly rate is less than 3 %. A mutual fund rating agency randomly selects 23 months and determines the rate of return for a certain fund. The standard deviation of the rate of return is computed to be 2.68%. Is there sufficient evidence to conclude that the fund has moderate risk at the a = 0.10 level of significance? A normal probability plot indicates that the monthly rates of return are normally distributed. What are the correct hypotheses for this test? The null hypothesis is H_0 The alternative hypothesis is H_1 Calculate the value of the test Use technology to determine the P-value for the test statistic. The P-value is (Round to three decimal places as needed) What is the correct conclusion at the a = 0.10 level of significance? Since the P-value is than the level of significance. the null hypothesis. There sufficient evidence to conclude that the fund has risk at theExplanation / Answer
Formulating the null and alternative hypotheses,
Ho: sigma >= 0.03 [ANSWER]
Ha: sigma < 0.03 [ANSWER]
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As we can see, this is a left tailed test.
Getting the test statistic, as
s = sample standard deviation = 0.0268
sigmao = hypothesized standard deviation = 0.03
n = sample size = 23
Thus, chi^2 = (N - 1)(s/sigmao)^2 = 17.55697778 [ANSWER, TEST STATISTIC]
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df = N - 1 = 22
Hence, by technology,
Pvalue = 0.268091819 [ANSWER]
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As P > 0.10, then we FAIL TO REJECT THE NULL HYPOTHESIS.
1. GREATER
2. FAIL TO REJECT
3. NO SUFFICIENT [ANSWERS]
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