# Question: An article in Fortune magazine reported on the rapid rise

An article in Fortune magazine reported on the rapid rise of fees and expenses charged by mutual funds. Assuming that stock fund expenses and municipal bond fund expenses are each approximately normally distributed, suppose a random sample of 12 stock funds gives a mean annual expense of 1.63 percent with a standard deviation of .31 percent, and an independent random sample of 12 municipal bond funds gives a mean annual expense of 0.89 percent with a standard deviation of .23 percent. Let μ1 be the mean annual expense for stock funds, and let μ2 be the mean annual expense for municipal bond funds. Do parts a, b, and c by using the equal variances procedure. Then repeat a, b, and c using the unequal variances procedure. Compare your results.

a. Set up the null and alternative hypotheses needed to attempt to establish that the mean annual expense for stock funds is larger than the mean annual expense for municipal bond funds. Test these hypotheses at the .05 level of significance. What do you conclude?

b. Set up the null and alternative hypotheses needed to attempt to establish that the mean annual expense for stock funds exceeds the mean annual expense for municipal bond funds by more than .5 percent. Test these hypotheses at the .05 level of significance. What do you conclude?

c. Calculate a 95 percent confidence interval for the difference between the mean annual expenses for stock funds and municipal bond funds. Can we be 95 percent confident that the mean annual expense for stock funds exceeds that for municipal bond funds by more than .5 percent? Explain.

a. Set up the null and alternative hypotheses needed to attempt to establish that the mean annual expense for stock funds is larger than the mean annual expense for municipal bond funds. Test these hypotheses at the .05 level of significance. What do you conclude?

b. Set up the null and alternative hypotheses needed to attempt to establish that the mean annual expense for stock funds exceeds the mean annual expense for municipal bond funds by more than .5 percent. Test these hypotheses at the .05 level of significance. What do you conclude?

c. Calculate a 95 percent confidence interval for the difference between the mean annual expenses for stock funds and municipal bond funds. Can we be 95 percent confident that the mean annual expense for stock funds exceeds that for municipal bond funds by more than .5 percent? Explain.

## Answer to relevant Questions

In the book Business Research Methods, Donald R. Cooper and C. William Emory (1995) discuss a manager who wishes to compare the effectiveness of two methods for training new salespeople. The authors describe the situation as ...To compare three brands of computer keyboards, four data entry specialists were randomly selected. Each specialist used all three keyboards to enter the same kind of text material for 10 minutes, and the number of words ...A small builder of speculative homes builds three basic house designs and employs two foremen. The builder has used each foreman to build two houses of each design and has obtained the profits given in Table (the profits are ...Consider the sample of 65 payment times given in Table 2.4 (page 42). Use these data to carry out a chi- square goodness- of- fit test to test whether the population of all payment times is normally distributed by doing the ...In the book Essentials of Marketing Research, William R. Dillon, Thomas J. Madden, and Neil A. Firtle discuss the relationship between delivery time and computer-assisted ordering. A sample of 40 firms shows that 16 use ...Post your question