Over the Past 30 Years, the Sample Standard Deviations of the Rates

question 12

Multiple Choice

Over the past 30 years, the sample standard deviations of the rates of return for stock X and Stock Y were 0.20 and 0.12, respectively. The sample covariance between the returns of X and Y is 0.0096. When testing whether the correlation coefficient differs from zero, the value of the test statistic is t₂₈ = 2.31. At the 5% significance level, the critical value is t_0.025,28 = 2.048. The conclusion to the hypothesis test is ________.

• A) to reject H₀; we can conclude that the correlation coefficient differs from zero
• B) to reject H₀; we cannot conclude that the correlation coefficient differs from zero
• C) do not reject H₀; we can conclude that the correlation coefficient differs from zero
• D) do not reject H₀; we cannot conclude that the correlation coefficient differs from zero

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