Question

The price to earnings ratio (P/E) is an important tool in financial work. A random sample of 14 large U.S. banks (J. P. Morgan, Bank of America, and others) gave the following P/E ratios.†

24

16

22

14

12

13

17

22

15

19

23

13

11

18

The sample mean is

x ≈ 17.1.

Generally speaking, a low P/E ratio indicates a "value" or bargain stock. Suppose a recent copy of a magazine indicated that the P/E ratio of a certain stock index is μ = 20. Let x be a random variable representing the P/E ratio of all large U.S. bank stocks. We assume that x has a normal distribution and σ = 5.1. Do these data indicate that the P/E ratio of all U.S. bank stocks is less than 20? Use α = 0.01. z value was -2.13 (rounded answer).

Find (or estimate) the P-value. (Round your answer to four decimal places.)

will you reject or fail to reject the null hypothesis? Are the data statistically significant at level α?

At the α = 0.01 level, we reject the null hypothesis and conclude the data are statistically significant.

At the α = 0.01 level, we reject the null hypothesis and conclude the data are not statistically significant.

At the α = 0.01 level, we fail to reject the null hypothesis and conclude the data are statistically significant.

At the α = 0.01 level, we fail to reject the null hypothesis and conclude the data are not statistically significant

Answer 1

At the α = 0.01 level, we fail to reject the null hypothesis and conclude the data are not statistically significant