Suppose a mutual fund qualifies as having moderate risk if the standard deviation of its monthly rate of return is less than 66 %. A mutual-fund rating agency randomly selects 28 months and determines the rate of return for a certain fund. The standard deviation of the rate of return is computed to be 2.82%. Is there sufficient evidence to conclude that the fund has moderate risk at the alpha = 0.10 level of significance?

Question

Mathematics

London Clarke

11 December, 06:35

Suppose a mutual fund qualifies as having moderate risk if the standard deviation of its monthly rate of return is less than 66 %. A mutual-fund rating agency randomly selects 28 months and determines the rate of return for a certain fund. The standard deviation of the rate of return is computed to be 2.82%. Is there sufficient evidence to conclude that the fund has moderate risk at the alpha = 0.10 level of significance?

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Mila · Answer 1

There is not sufficient evidence to conclude that the fund has moderate risk at the a = 0.01 level of significance

Step-by-step explanation:

H0: sigma = 66%

Ha:sigma < 66%

Chi square = (28-1) * 2.82^2/66^2=0.049

p value = 0.286

as p value>0.01 we do not can reject H0

So there is not sufficient evidence to conclude that the fund has moderate risk at the a = 0.01 level of significance