A Financial Planner Wants to Compare the Yield of Income

question 65

Essay

A financial planner wants to compare the yield of income and growth mutual funds. Fifty thousand dollars is invested in each of a sample of 35 income and 40 growth funds. The mean increase for a two-year period for the income funds is $900. For the growth funds, the mean increase is $875. Income funds have a sample standard deviation of $35; growth funds have a sample standard deviation of $45. Assume that the population standard deviations are equal. At the 0.05 significance level, is there a difference in the mean yields of the two funds?
What decision is made about the null hypothesis using an α = 0.05?

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Definitions:

Binomial Distribution

A probability distribution that describes the number of successes in a fixed number of independent experiments, each with the same probability of success.

Significance Level

The threshold chosen by a researcher or analyst to determine the statistical significance of a result, typically denoted by alpha (α) and representing the probability of a type I error.

Proportion Difference

The difference in the percentage of occurrences of a certain attribute or outcome between two groups or over time.

Canadians

Refers to the people who are citizens of Canada, a country located in the northern part of North America.