7 Reviewing the EPS forecasting performance data for Analysts A and B, you want to investigate whether the larger average forecast errors of Analyst A are due to chance or to a higher underlying mean value for Analyst A. Assume that the forecast errors of both analysts are normally distributed and that the samples are independent.

A Formulate null and alternative hypotheses consistent with determining whether the population mean value of Analyst A’s forecast errors (μ1) are larger than Analyst B’s (μ2).

B Identify the test statistic for conducting a test of the null hypothesis formulated in Part A.

C Identify the rejection point or points for the hypothesis tested in Part A, at the 0.05 level of significance.

D Determine whether or not to reject the null hypothesis at the 0.05 level of significance.