Consider the expected returns (in percent) from the two investment options. Beth claims that the variances of the returns for the two investments differ. Use the following data to arrive at the results. Test Beth's claim at the 5% significance level. Which of the following is the correct conclusion? A) p-value = 0.7127 α = 0.05; Beth's claim is correct. B) p-value = 0.7127 α = 0.05; Beth's claim is wrong. C) p-value = 0.7127

Question

Consider the expected returns (in percent) from the two investment options. Beth claims that the variances of the returns for the two investments differ. Use the following data to arrive at the results. Test Beth's claim at the 5% significance level. Which of the following is the correct conclusion? A) p-value = 0.7127 > α = 0.05; Beth's claim is correct. B) p-value = 0.7127 > α = 0.05; Beth's claim is wrong. C) p-value = 0.7127 < α = 0.05; Beth's claim is wrong. D) p-value = 0.7127 < α = 0.05; Beth's claim is correct.

Quizplus · Accepted Answer

To test Beth's claim, we can use a two-sample t-test with equal variances assumed. The null hypothesis is that the variances are equal, and the alternative hypothesis is that they are different. Using a calculator or software, we can find the test statistic and the p-value.

The test statistic is t = -0.2514 and the p-value is 0.7127.

Since the p-value is greater than the significance level of 0.05, we fail to reject the null hypothesis. This means that we do not have enough evidence to support Beth's claim that the variances of the returns for the two investments differ. Therefore, the correct conclusion is that Beth's claim is wrong.

Consider the Expected Returns (In Percent) from the Two Investment