Investment Institutions Usually Have Funds with Different Risk Versus Reward

question 104

Multiple Choice

Investment institutions usually have funds with different risk versus reward prospectuses. A trading magazine wants to determine if the returns of high-risk funds are greater than low-risk funds. The magazine records the return of high- and low-risk funds for a sample of 22 institutions. For the Wilcoxon signed-rank test, where D = high-risk return − low-risk return, the value of the test statistic is T = T⁺ = 185. For the Wilcoxon signed-rank test for the matched-pairs, the competing hypotheses are ________.

• A) H₀: m_D = 0; H_A: m_D ≠ 0
• B) H₀: m_D ≤ 0; H_A: m_D > 0
• C) H₀: m_D ≠ 0; H_A: m_D = 0
• D) H₀: m_D ≥ 0; H_A: m_D < 0

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Definitions:

Nonparticipating

A term typically used in insurance, referring to policies that do not entitle the policyholder to share in the insurer's surplus or profits.

Cumulative

A term referring to an attribute of financial items (like dividends) that accumulate over time until they are paid or settled.

Preferred Stock

A class of stock with preferential rights over common stock, often including fixed dividends and priority in assets upon liquidation.

Noncash Assets

Assets that are not in the form of cash or cannot be easily converted to cash, such as property, plant, and equipment.