A sample of 60 mutual funds was taken and the mean return in the sample was 13%
ID: 3296539 • Letter: A
Question
A sample of 60 mutual funds was taken and the mean return in the sample was 13% with a standard deviation of 6.9%. The return on a particular index of stocks (against which the mutual funds are compared) was 11.5%. Therefore, the p-value is 0.0465. When testing the hypothesis (at the 1% level of significance) that the average return on actively-managed mutual funds is higher than the return on an index of stocks, what is your conclusion concerning the null hypothesis? Reject the null hypothesis Fail to reject the null hypothesis
Explanation / Answer
The p-value of the test = 0.0465.
Level of significance of the test = 1% = 0.01.
Since p-value > level of significance, we fail to reject the null hypothesis. (Ans).