A portfolio manager was analyzing the price-earnings ratio for this year's performance.His boss said that the average price-earnings ratio was 20 for the many stocks,which his firm had traded,but he felt that figure was too high.The portfolio manager randomly selected a sample of 50 P/E ratios and found a mean of 18.17 and standard deviation of 4.60.Assume that the population is normally distributed and test at the 0.01 level of significance.
The decision is: Because the test statistic t = -2.81 falls in the rejection region,reject H0.At the 0.01 level,there is enough statistical evidence to conclude that the alternative hypothesis is true and that the average P/E ratio for the stocks is less than 20.

Question

Quizplus · Accepted Answer

The decision statement says to reject the null hypothesis and conclude that the alternative hypothesis is true, which means that the average P/E ratio for the stocks is less than 20. Since the test statistic falls in the rejection region, there is enough evidence to support this conclusion at the 0.01 level of significance. Therefore, the statement is true.

A Portfolio Manager Was Analyzing the Price-Earnings Ratio for This