A Portfolio Manager Claims That the Mean Annual Return on One

question 81

Essay

A portfolio manager claims that the mean annual return on one of the mutual funds he manages exceeds 8%.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.

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Definitions:

Monetary Policy

The actions undertaken by a central bank, such as the Federal Reserve, to control the supply of money and interest rates in order to achieve macroeconomic goals.

1990's

A decade characterized by major global events, technological advancements, and cultural shifts, lasting from 1990 to 1999.

High Saving Rate

A high saving rate indicates a significant portion of an economy's income is not spent on current consumption but saved for future use, potentially impacting economic growth and investment.

Aggregate Demand

Sum total of the requirement for goods and services across an economy, based on a particular price level over a defined period.