Question: A financial analyst watched a particular stock for several months
A financial analyst watched a particular stock for several months. The price of this stock remained fairly stable during this time. In fact, the financial analyst claims that the variance of the price of this stock did not exceed $4 for the entire period. Recently, the market heated up, and the price of this stock appears more volatile. To determine whether it is more volatile, a sample of closing prices of this stock for eight days is taken randomly. The sample mean price is $36.25, with a sample standard deviation of $7.80.Using a level of significance of .10, test to determine whether the financial analyst’s previous variance figure is now too low. Assume stock prices are normally distributed.
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