A Portfolio Manager Was Analyzing the Price-Earnings Ratio for This

question 51

True/False

A portfolio manager was analyzing the price-earnings ratio for this year's performance.His boss said that the average price-earnings ratio was 20 for the many stocks,which his firm had traded,but he felt that figure was too high.The portfolio manager randomly selected a sample of 50 P/E ratios and found a mean of 18.17 and standard deviation of 4.60.Assume that the population is normally distributed and test at the 0.01 level of significance.
The decision is: Because the test statistic t = -2.81 falls in the rejection region,reject H0.At the 0.01 level,there is enough statistical evidence to conclude that the alternative hypothesis is true and that the average P/E ratio for the stocks is less than 20.

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Definitions:

T Statistic

A value used in statistical hypothesis testing to determine if there is a significant difference between two sample means.

Body Fat

The percentage of a person's body mass that is made up of fat tissue versus lean body mass.

ANOVA Table

A table used to summarize the sources of variability in an analysis of variance, which helps determine whether there are significant differences between group means.

NFL

The National Football League, a professional American football league consisting of 32 teams divided between the National Football Conference (NFC) and the American Football Conference (AFC).