A Fund Manager Wants to Know If the Annual Rate

question 9

Multiple Choice

A fund manager wants to know if the annual rate of return is greater for growth stocks (sample 1) than for value stocks (sample 2) . The fund manager collects data on the returns of growth and value funds. Below are the sample sizes and rank sums for the Wilcoxon rank-sum test. Using the critical value approach and α = 0.01, the appropriate conclusion is ________.

• A) reject the null hypothesis; we can conclude the median return of growth stocks is greater than the median return of value stocks
• B) do not reject the null hypothesis; we cannot conclude the median return of growth stocks is greater than the median return of value stocks
• C) do not reject the null hypothesis; we can conclude the median return of growth stocks is greater than the median return of value stocks
• D) reject the null hypothesis; we cannot conclude the median return of growth stocks is greater than the median return of value stocks

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Definitions:

Required Return

The minimum gain needed from an investment to make it worthwhile for the investor, considering the risk associated.

Beta

A measure of a stock's volatility in relation to the overall market; a beta higher than 1 indicates higher volatility than the market, and a beta lower than 1 indicates lower.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, typically represented by the yield on government bonds.

Intrinsic Value

The actual value of a company or an asset based on underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.