Question: Table 2 shows two random independent samples of stock return over 10 years' time. Assume the rate of return for stock A and for stock
Table 2 shows two random independent samples of stock return over 10 years' time. Assume the rate of return for stock A and for stock B are normally distributed with population standard deviation = 0.01 and = 0.02 respectively. To investigate whether the average rate of return for stock A different from the average rate of return for stock B, please answer the following questions.
- a) State the null hypothesis and the alternative hypothesis.
- b) Select an appropriate test statistic and state its distribution.
- c) Calculating the sample mean A of the rate of return for stock A and the sample
- mean of the rate of return for stock B (show your final answer correct to three decimal places).
- d)Calculate the test statistics from the sample (show your final answer correct to two decimal places).
- e) If the significant level is 0.1, calculate the critical values.
- f) Is the average rate of return for stock A different from the average rate of return for stock B, justify your answer.
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