Question

A conservative investor desires to invest in a bond fund in which her investment amount is kept relatively safe. A national investment group claims to have a bond fund which has maintained a consistent share price of $11.25, consistent because the variation in price (as measured by standard deviation) is at most $0.45 since fund inception. To test this claim, the investor randomly selects fifty days during the last year and determines the share price for the fund on closing of those days. The standard deviation of this sample group is found to be $0.62. Use an appropriate hypothesis test at the 5% significance level to determine if the investor should conclude that the variation is greater than that claimed by the national investment group.   

                                                                                   

1. Give the null and alternative hypotheses for this test in symbolic form.                                                                                    H0:   

H1:

B) After applying a correct hypothesis test, write a statement to give the investor, explaining the results of the hypothesis test. Make your statement tie to the context of the investment question of variability in measures.          

Answer 1