Suppose a mutual fund qualifies as having moderate risk if the standard deviatio
ID: 3232579 • Letter: S
Question
Suppose a mutual fund qualifies as having moderate risk if the standard deviation of its monthly rate of return is less than 66%. 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 5.19%. Is there sufficient evidence to conclude that the fund has moderate risk at the alpha equals 0.05=0.05 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 H0: sigma pp mu not equals equals= greater than> less than< 0.06. 0.0519. The alternative hypothesis is H1: pp mu sigma equals= not equals less than< greater than> 0.06. 0.0519. Calculate the value of the test statistic. chi Subscript 0 Superscript 220equals= nothing (Round to two decimal places as needed.) Use technology to determine the P-value for the test statistic. The P-value is nothing. (Round to three decimal places as needed.) What is the correct conclusion at the alpha equals 0.05=0.05 level of significance? Since the P-value is less greater than the level of significance, reject do not reject the null hypothesis. There is is not sufficient evidence to conclude that the fund has moderate risk at the 0.05 level of significance.
Explanation / Answer
Test and CI for One Variance
Method
Null hypothesis = 66
Alternative hypothesis < 66
The chi-square method is only for the normal distribution.
The Bonett method cannot be calculated with summarized data.
Statistics
N StDev Variance
23 5.19 26.9
95% One-Sided Confidence Intervals
Upper
Bound
for Upper Bound
Method StDev for Variance
Chi-Square 6.93 48.0
Tests
Test
Method Statistic DF P-Value
Chi-Square 0.14 22 0.000
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