Question

Suppose a mutual fund qualifies as having moderate risk if the standard deviation of its monthly rate of return is less than 5% A mutual fund rating agency randomly selects 28 months and determines the rate of return for a certain fund. The standard deviation of the rate of return is computed to be 3 54% Is there sufficient evidence to conclude that the fund has moderate risk at the a= 0.05 level of significance? A normal probablity plot indicates that the monthly rates of return are normally distributed What are the correct hypotheses for this test? The null hypothesis is H The alternative hypothesis is H Calculate the value of the test statistic 2 = (Round to three decimal places as needed) Use technology to determine the P-value for the test statistic The P value is (Round to three decimal places as needed) What is the correct conclusion at the a 005 level of significance? Since the value is than the level of significance, risk at the 005 level of significance here suficient evidence to conclude that the fund has moderate

Answer 1

Solution :

Null Hypothesis:

= 0.01

Alternative Hypothesis :

Ηα;σ5

Test statistic:

Chi square =

(n - 1) + (sc)

= = 13.534

(28 -1)* (3.54/5)

p-value at alpha = 0.05, df = n - 1 = 28 - 1 = 27 is

=1-CHIDIST(13.534,27)=0.015

p-value < alpha,

0.015 < 0.05

So, we reject the null hypothesis.

There is sufficient evidence to conclude that fund has moderate risk at 0.05 level of significance.