Anita Cruz recently assumed responsibility for a large investment portfolio.She wonders whether industry sector influences investment objective.Her staff prepared the following contingency table from a random sample of 200 common stocks.
Using $\alpha$ = .01,appropriate decision is ______________.
A)reject the null hypothesis and conclude the two variables are not independent
B)reject the null hypothesis and conclude the two variables are independent
C)do not reject the null hypothesis and conclude the two variables are not independent
D)do not reject the null hypothesis and conclude the two variables are independent
E)do nothing

Question

Anita Cruz recently assumed responsibility for a large investment portfolio.She wonders whether industry sector influences investment objective.Her staff prepared the following contingency table from a random sample of 200 common stocks.  
Using $\alpha$ = .01,appropriate decision is ______________.
A)reject the null hypothesis and conclude the two variables are not independent 
B)reject the null hypothesis and conclude the two variables are independent 
C)do not reject the null hypothesis and conclude the two variables are not independent 
D)do not reject the null hypothesis and conclude the two variables are independent 
E)do nothing

Quizplus · Accepted Answer

To determine whether industry sector influences investment objective, we need to test the independence of the two variables. The appropriate statistical test for this scenario is the chi-square test of independence. The calculated chi-square value of 14.519 exceeds the critical value of 6.635, with a degrees of freedom of (3-1)*(2-1)=2, at a significance level of 0.01. Therefore, we reject the null hypothesis of independence and conclude that industry sector and investment objective are not independent. Hence, Anita Cruz should consider industry sector while making investment decisions.

Anita Cruz Recently Assumed Responsibility for a Large Investment Portfolio α\alphaα

Anita Cruz Recently Assumed Responsibility for a Large Investment Portfolio $\alpha$