ISMT111 Problem Set #7
(1)
You are analyzing Sendar Equity Fund, a mutual fund that has been in existence for 24 months.
Over this period, it has achieved a monthly (sample) average return of 0.95 percent with a
sample standard deviation of monthly returns of 0.36 percent.
Given its level of systematic
risk relative to the market, (i.e., its
beta coefficient
), this mutual fund was expected to have
earned a monthly return of at least 1.15 percent over that time period. Taking this expectation
as the null hypothesis
H
o
about the population monthly return
μ
X
of the fund, are the actual
(i.e., sample) results of the past 24 months consistent with expectation?
Test the following
hypothesis:
H
o
:
μ
X
≥
1
.
15
against
H
a
:
μ
X
<
1
.
15
If monthly return,
X
, of this mutual fund is normally distributed, the test conclusion would be
(A) Reject
H
0
at the .005 level.
(B) Do not reject
H
0
at the .01 level but reject
H
0
at the .025 level.
(C) Reject
H
0
at the .05 level but do not reject
H
0
at the .025 level.
(D) Do not reject
H
0
at the .005 level but reject
H
0
at the .01 level.
(E) Reject
H
0
at the .10 level but do not reject
H
0
at the .05 level.
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 Fall '09
 AnthonyChan
 Normal Distribution, Standard Deviation, Statistical hypothesis testing, Type I and type II errors, ... ...

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