Question

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III. Short Answer: Place your final answers in the blanks provided. (#6 & #7 are worth 10 pts. each) 6. You wish to invest in socially responsible stocks but fear that they may be overpriced as measured by the P/E, the Price-to-Earnings ratio. The average P/E Ratio for the S&P Index is 15.74, and the standard deviation is not known. You take a random sample of 32 socially conscious stocks and find the P/E sample mean is 17.9 with a sample standard deviation of 5.2. Conduct a hypothesis test at the a 0.05 significance level to determine if the average P/E is higher for socially conscious stocks. State the following: Circle the Type of Test that should be performed: Propotion, Z-test Mean, T-test Mean, Z-test a. b. Null Hypothesis: c. Alternative Hypothesis: d. P-value: (round to 4 decimals) Circle the correct bolded terms to appropriately state the conclusion of the hypothesis test: c. Reject/Eail to Reject the null hypothesis since the P-value is greater than/ less than /equal to a=0.05 the significance level. There is / is not sufficient evidence to support the average P/E ratio is higher for socially conscious stocks.

Answer 1

6.

a. Mean, T-test

b. _$\mu$ (population mean) = 15.74

c. _$\mu$ (population mean) > 15.74

d. 0.0127

e. Reject, less than

7.

a. Chi-Squared Test for Independence

b. The two population are independent

c. The two population are not independent

d. 0.0878

e.

Occupation	Extroverted	Introverted
Clergy	24.16176	28.83824
M.D.	36.92647	44.07353
Lawyer	31.91176	38.08824

f. Fail to Reject, greater than