Question

10. 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 test statistic is 1.68. When testing the hypothesis that the average return on actively-managed mutual funds is higher than the return on an index of stocks, if the critical value is 1.96, what is your conclusion concerning the null hypothesis

Answer 1

In this question, we shall be accepting the null hypothesis H0 since the critical value is greater than the test statistic value

Explanation:

Here in this question, we want to make a conclusion about the null hypothesis H0.

To make or give the correct conclusion about the null hypothesis in this case, we shall need to compare the absolute value of the test statistic used against the value of the critical value.

Hence, we draw a conclusion if the test statistic is larger or smaller than the critical value.

From the value given in the question, we can see that the test statistic given as 1.68 is lesser in value compared to the critical value given as 1.96.

In this kind of case, the conclusion that we shall be drawing is that we will accept the null hypothesis H0 and reject the alternative hypothesis