7. An investment counselor, Anna Lynn, wonders if the Metals fund is significantly riskier than the Income fund. She randomly selected 10 investors ( , ) of buying Metals fund and 12 investors (n, ) of buying Income fund. The average return of Metals fund (x, ) is 24.65% while the average return of Income fund (x, ) is 8.51%. In addition, the standard deviation of return for Metal fund (s, ) is 37.13% while the standard deviation of return for Income fund (s,) is 11.07%. Let investors of buying Metals fund be group 1 while investors of buying Income fund be group 2. a. Use math symbol to formulate null and alternative hypotheses to test whether or not the Metals fund is significantly riskier than the Income fund. b. At the 0.05 level of significance, what is the value of the test statistic? What are degrees of freedom? What is the critical value? Using the critical value approach, is the Metals fund is significantly riskier than the Income fund? What is your conclusion? Interpret. c. Using a 0.05 level of significance and the p-value approach, what is the p-value? And what is your conclusion? Interpret. d. What assumption do you need to make in (b) about the two populations in order to implement the test?|

A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
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7. An investment counselor, Anna Lynn, wonders if the Metals fund is significantly riskier than
the Income fund. She randomly selected 10 investors ( , ) of buying Metals fund and 12
investors (n, ) of buying Income fund. The average return of Metals fund (x, ) is 24.65%
while the average return of Income fund (x, ) is 8.51%. In addition, the standard deviation of
return for Metal fund (s, ) is 37.13% while the standard deviation of return for Income fund
(s,) is 11.07%. Let investors of buying Metals fund be group 1 while investors of buying
Income fund be group 2.
a. Use math symbol to formulate null and alternative hypotheses to test whether or not the
Metals fund is significantly riskier than the Income fund.
b. At the 0.05 level of significance, what is the value of the test statistic? What are degrees
of freedom? What is the critical value? Using the critical value approach, is the Metals
fund is significantly riskier than the Income fund? What is your conclusion? Interpret.
c. Using a 0.05 level of significance and the p-value approach, what is the p-value? And
what is your conclusion? Interpret.
d. What assumption do you need to make in (b) about the two populations in order to
implement the test?|
Transcribed Image Text:7. An investment counselor, Anna Lynn, wonders if the Metals fund is significantly riskier than the Income fund. She randomly selected 10 investors ( , ) of buying Metals fund and 12 investors (n, ) of buying Income fund. The average return of Metals fund (x, ) is 24.65% while the average return of Income fund (x, ) is 8.51%. In addition, the standard deviation of return for Metal fund (s, ) is 37.13% while the standard deviation of return for Income fund (s,) is 11.07%. Let investors of buying Metals fund be group 1 while investors of buying Income fund be group 2. a. Use math symbol to formulate null and alternative hypotheses to test whether or not the Metals fund is significantly riskier than the Income fund. b. At the 0.05 level of significance, what is the value of the test statistic? What are degrees of freedom? What is the critical value? Using the critical value approach, is the Metals fund is significantly riskier than the Income fund? What is your conclusion? Interpret. c. Using a 0.05 level of significance and the p-value approach, what is the p-value? And what is your conclusion? Interpret. d. What assumption do you need to make in (b) about the two populations in order to implement the test?|
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