An investor is interested in determining whether a portfolio of dividend-paying

Question

An investor is interested in determining whether a portfolio of dividend-paying stocks that he holds has performed the same as a portfolio of non-dividend-paying stocks over the last 10 months. The portfolios are composed of a dividend paying/non-dividend-paying pairs in each industry he holds. The returns on the portfolios and corresponding results at 5% significance level are shown below. What is the alternative hypothesis? A. H: mu d notequalto 0 B. Ha: mu d 0 D. Ha: mu d = 0 E. H0: mu d notequalto 0 What is the rejection region for testing at the 0.05 level of significance? A. |t| > 1.83 B. |t| > 2.26 C. |t|

Explanation / Answer

Solution:

H0: means of dividend stocks =means of non dividend stocks

1=2

Alternative Hypothesis;

1 2

that is 1- 2   0

H1means of dividend stocks NOT =means of non dividend stocks

solution1:

answer A

Solution2:

degrees of freedom =n-1=10-1=9

alpha=0.05

r=t crit=-2.26 and +2.26

answer B

|t|>2.26

Solution3:

mean diff=mean(pa ying)-mean(non paying)

=0.22791-0.18501

=0.0429

ANSWER C

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