Statistics: Informed Decisions Using Data (4th Edition)

Published by Pearson
ISBN 10: 0321757270
ISBN 13: 978-0-32175-727-2

Chapter 11 - Section 11.5 - Assess Your Understanding - Applying the Concepts - Page 580: 21d

Answer

$F_0\gt F_{\frac{α}{2},n_1-1,n_2-1}$: null hypothesis is rejected. There is enough evidence to conclude that the risk of the value funds and the risk of the growth funds differ.

Work Step by Step

$σ_1,s_1,n_1~and~d.f._1$ refer to value funds and $σ_2,s_2,n_2~and~d.f._2$ refer to growth funds. $H_0:~σ_1=σ_2$ versus $H_1:σ_1\neσ_2$ $s_1=\sqrt {\frac{∑(x_{1_i}-x ̅_1)^2}{n_1-1}}=2.295$ $s_2=\sqrt {\frac{∑(x_{2_i}-x ̅_2)^2}{n_2-1}}=0.726$ $F_0=\frac{s_1^2}{s_2^2}=\frac{2.295^2}{0.726^2}=9.99$ $d.f_1=n_1-1=10-1=9$ $d.f_2=n_2-1=10-1=9$ Two-tailed test: $F_{\frac{α}{2},n_1-1,n_2-1}=F_{0.025,9,9}=4.03$ (According to table VIII, for $d.f._1=120$, the closest value to 259, $d.f._2=200$, the closest value to 268, and area in the right tail = 0.025) $F_{1-\frac{α}{2},n_1-1,n_2-1}=F_{0.975,9,9}=\frac{1}{F_{0.025,9,9}}=\frac{1}{4.03}=0.25$ Since $F_0\gt F_{\frac{α}{2},n_1-1,n_2-1}$, we reject the null hypothesis.
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