Question

You are investing for your retirement and your financial advisor has strongly recommended the mutual fund, Fidelity Select Retailing Portfolio, FSRPX. She suggested this fund can meet your needs since it has been around since December 1985 and has performed quite well. Being the aggressive investor that you are, you want to invest in a fund that has a high annual return rate. The annual returns (in percents, from oldest to newest) are as follows: 14.18, -7.36, 38.71, 29.53, -5.03, 68.13, 22.08, 13.03, -5.01, 11.98, 20.86, 41.73, 45.76, 5.20, -11.27, -2.39, -18.94, 31.1, 16.1, 7.14, 15.17, -7.97, -29.58, 57.82, 28.06, 3.36, 24.83, 43.93, 12.02, 18.41, 4.43, 25.82.

You will invest in the FSRPX fund if the annual return is significantly greater than 9 percent annually. Perform the appropriate hypothesis test to determine if you will include the Fidelity Select Retailing Portfolio mutual fund in your retirement plan. Use alpha = .05 for the test. Will you include the FSRPX fund in your retirement portfolio or not? Why? Explain in detail.

1. State which test you are using
2. State your hypotheses in the correct form (both Ho and Ha).
3. State your rejection rule (in terms of the critical value not in terms of alpha)
4. Calculate your test statistic
5. State your decision made
6. Determine the p-value
7. State your conclusion, in the context of the problem
8. State which type of error you may have made.

Answer 1