Question: The first sale of stock by a private company is

The first sale of stock by a private company is known as an IPO (Initial Public Offering). The timing of the sale, the type of stock being issued (common or preferred), and the price at which the stock is being offered are important factors in an IPO’s success. Fairline Investments recently conducted a study in which it identified four IPO categories based on these three factors. The company wanted to compare success rates across the four categories. (Fairline classifies an IPO as successful if the stock holds its price for at least six months after issue.) A sample of 150 IPOs was selected from each of the IPO categories and the success rate for each sample was determined. The success rate for the sample of Category 1 IPOs was .64; for Category 2, .72, for Category 3, .68; and for Category 4, .76
Use the chi square distribution to test the hypothesis that success rate is the same for all four IPO categories. Use a significance level of 5%.

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  • CreatedJuly 16, 2015
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