Question

suppose a mutual fund qualifies as having moderate risk if the standard deviation of its monthly rate of return is less than 5%. A mutual-fund rating agency randomly selects 29 months and determines the rate of return for a certain fund. the standard deviation of the rate of return is computed to be 3.69%. is there sufficent evidence to conclude that the fund has moderate risk at the a= 0.01 level of significance?

Answer 1

for moderate risk :

variance <= 0.05^2

variance <= 0.0025

given :

SD = 0.0369

varaince = 0.0369^2 = 0.00136161

n = 29

test :

there is not sufficent evidence to conclude that the fund has moderate risk

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