12th Edition

ISBN: 9780357724880

Author: BRASE

Publisher: CENGAGE L

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Textbook Question

Chapter 8.1, Problem 22P

For Problems 19–24, please provide the following information.

(a) What is the level of significance? State the null and alternate hypotheses. Will you use a left-tailed, right-tailed, or two-tailed test?
(b) Check Requirements What sampling distribution will you use? Explain the rationale for your choice of sampling distribution. Compute the z value of the sample test statistic.
(c) Find (or estimate) the P-value. Sketch the sampling distribution and show the area corresponding to the P-value.
(d) Based on your answers in parts (a) to (c), will you reject or fail to reject the null hypothesis? Are the data statistically significant at level a?
(e) Interpret your conclusion in the context of the application.

Finance: P/E of Stocks The price-to-earnings (P/E) ratio is an important tool in financial work. A random sample of 14 large U.S. banks (J.P. Morgan, Bank of America, and others) gave the following P/E ratios (Reference: Forbes).

Chapter 8.1, Problem 22P, For Problems 1924, please provide the following information. (a) What is the level of significance?

The sample mean is x ¯ ≈ 17.1. Generally speaking, a low P/E ratio indicates a “value” or bargain stock. A recent copy of The Wall Street Journal indicated that the P/E ratio of the entire S&P 500 stock index is μ = 19. Let x be a random variable representing the P/E ratio of all large U.S. bank stocks. We assume that x has a normal distribution and σ = 4.5. Do these data indicate that the P/E ratio of all U.S. bank stocks is less than 19? Use α = 0.05.

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

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Chapter 8.1, Problem 21P

Chapter 8.1, Problem 23P

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Chapter 8 Solutions

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Solution Summary: The author states the null and alternative hypothesis, and the z value of the sample test statistic.

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