A Fund Manager Wants to Know If It Is Equally

question 27

Multiple Choice

A fund manager wants to know if it is equally likely that the Dow Jones Industrial Average will go up each day of the week. For each day of the week, the fund manager observes the following number of days when the Dow Jones Industrial Average goes up. Using the critical value approach, the decision and conclusion are

• A) reject the null hypothesis; not all of the proportions are the same
• B) reject the null hypothesis; all of the proportions are not the same
• C) do not reject the null hypothesis; all of the proportions are the same
• D) do not reject the null hypothesis; we cannot conclude that not all of the proportions are the same

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Definitions:

Payback Period

Payback period is the duration required to recover the cost of an investment, calculated by dividing the initial investment by the annual cash inflow.

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.

Salvage Value

The determined residual amount of an asset at the cessation of its utility.

Net Cash Inflows

The total amount of cash received minus cash paid out over a specific period, not including non-cash expenses.