The Printout Below Refers to the Weekly Closing Stock Prices

question 177

Multiple Choice

The printout below refers to the weekly closing stock prices for Air Canada on 20 randomly selected weeks in 2000. Using a 5% level of significance, can you say that the average Air Canada stock price was different from $19.50?

• A) Fail to reject the null hypothesis and conclude the mean stock price was $19.50.
• B) Reject the null hypothesis and conclude the mean stock price was lower than $19.50.
• C) Reject the null hypothesis and conclude the mean index was greater than $19.50.
• D) Reject the null hypothesis and conclude the mean index was different from $19.50.
• E) None of these statements are true

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Definitions:

Market Risk

Variation on the return on a stock investment caused by things that tend to affect all stocks.

Stand-Alone Risk

The risk associated with investing in a stock that’s held by itself, outside of a portfolio. Stand-alone risk depends on the volatility of a stock’s own return rather than on the effect its inclusion has on the volatility of the return of a portfolio.

Business Risk

The potential for loss or failure in the operation of a company, often due to external and internal factors.

Financial Assets

Assets that derive value because of a contractual claim on them, such as stocks, bonds, bank deposits, and other investments.