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:

Treatment Orders

Directives given by healthcare providers outlining specific treatments or procedures to be administered to patients.

Objective Data

Information that can be observed by others; free of feelings, perceptions, prejudices.

Respirations

The process of inhaling and exhaling air; breathing.

Critical Thinking Skills

The ability to actively and skillfully conceptualize, apply, analyze, synthesize, and/or evaluate information gathered from observation, experience, reflection, reasoning, or communication.