Exhibit 11-4.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. Refer to Exhibit 11-4.Test Beth's claim at the 5% significance level.What is the 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

Exhibit 11-4.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. Refer to Exhibit 11-4.Test Beth's claim at the 5% significance level.What is the 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 need to perform a two-sample t-test for equal variances. Using the data given in Exhibit 11-4, the calculated p-value is 0.7127, which is greater than the significance level of 0.05. Therefore, we fail to reject the null hypothesis that the variances of the returns for the two investments are equal. This means that we do not have enough evidence to support Beth's claim that the variances are different. Hence, the correct answer is B.