A Portfolio Manager Claims That the Mean Annual Return on One

question 97

Essay

A portfolio manager claims that the mean annual return on one of the mutual funds he manages exceeds 8%.In order to substantiate his claim,he states that over the past 10 years,the mean annual return for the mutual fund has been 9.5% with a sample standard deviation of 1.5%.Assume annual returns are normally distributed.
A)Specify the competing hypotheses to test the portfolio manager's claim.
B)Calculate the value of the test statistic.
C)At the 5% significance level,use the critical value approach to state the decision rule.
D)Is the portfolio manager's claim substantiated by the data? Explain.

• A)Specify the competing hypotheses to test the portfolio manager's claim.
• B)Calculate the value of the test statistic.
• C)At the 5% significance level,use the critical value approach to state the decision rule.
• D)Is the portfolio manager's claim substantiated by the data? Explain.

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Definitions:

Cognitive Abilities

A term referring to the mental skills and functions related to the acquisition, processing, and use of knowledge, including memory, reasoning, and problem-solving.

Late Adulthood

A life stage characterized by the aging process, typically considered to begin around the age of 65, marked by changes in physical, cognitive, and social functioning.

Stability

signifies a state or condition of being steady, constant, and unchanged over time.

Ecological Validity

The idea that cognition should be measured in settings that are as realistic as possible and that the abilities measured should be those needed in real life.