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

question 21

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 is greater than 2.33,reject H0.At the 0.01 level,the sample data suggest that the average P/E ratio for the stocks is less than 20.

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