A Financial Analyst Examines the Performance of Two Mutual Funds

question 60

Multiple Choice

A financial analyst examines the performance of two mutual funds and claims that the variances of the annual returns for the bond funds differ.To support his claim,he collects data on the annual returns (in percent) for the years 2001 through 2010.The analyst assumes that the annual returns for the two emerging market bond funds are normally distributed.Use the following summary statistics. The competing hypotheses are At α = 0.10,is the analyst's claim supported by the data using the critical value approach?

• A) No,because the value of the test statistic is less than the critical F value.
• B) Yes,because the value of the test statistic is less than the critical F value.
• C) Yes,because the value of the test statistic is greater than the critical F value.
• D) No,because the value of the test statistic is greater than the critical F value.

---

Definitions:

Relative Purchasing Power Parity

A theory which posits that the rate of inflation in two different countries over a specific period affects the exchange rate between their two currencies.

Expected Inflation

The rate at which the general level of prices for goods and services is expected to rise, eroding purchasing power.

Euros

The official currency of the Eurozone, which is used by 19 of the 27 European Union countries.

Exchange Rate

The rate at which one currency will be exchanged for another currency.