Question

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 27 months and determines the rate of return for a certain fund. The standard deviation of the rate of return is computed to be 4.48​%. Is there sufficient evidence to conclude that the fund has moderate risk at the α=0.10 level of​ significance? A normal probability plot indicates that the monthly rates of return are normally distributed. What are the correct hypotheses for this​ test? Calculate the value of the test statistic. Use technology to determine the​ P-value for the test statistic. What is the correct conclusion at the α=0.10 level of​ significance?

Answer 1

Population Variance

Sample Variance

P-Value: 0.0000

Since P-value < alpha 0.10 so we reject the null hypothesis.

Thus we conclude that the standard deviation of its monthly rate of return is less than 66​%