Hypothesis Testing.docx

Hypothesis Testing.docx - Hypothesis Testing 1 State the...

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Hypothesis Testing 1. State the null and alternative hypotheses 2. State the significance level 3. Write the formula for the test statistic 4. State the distribution of the test statistic under the null hypothesis 5. State the rejection region 6. Compute the test statistic 7. State the decision (Reject or Do Not Reject Ho) 8. Interpret your results. One of the most difficult tasks of developing and managing a global portfolio is assessing relations between the risks of potential foreign investments and their credit rating. In order to help assess this relationship, a sample of 40 foreign investments was taken. The following regression results were reported: Analysis of Variance Source Sum of Squares DF Regression 3064.405 1 Error 6107.539 38 Variable Estimate Standard Error Risk -.3996 .0915 Intercept 57.7551 6.1278 Note: As there are no natural units to measure risk and credit rating, you may just use the generic term ‘unit’ to describe these. a) What is the estimate of the effect of risk on the credit rating of a foreign investment?
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