An article in Fortune magazinereported on the rapid rise of fees and expenses charged by mutual funds.Assuming that stock fund expenses and municipal bond fund expenses are eachapproximately normally distributed, suppose a random sample of 12 stock fundsgives a mean annual expense of 1.60 percent with a standard deviation of 0.33percent, and an independent random sample of 12 municipal bond funds gives amean annual expense of 0.88 percent with a standard deviation of 0.20 percent.Let µ1 be the mean annual expense for stock funds,and let µ2 be the mean annual expense for municipalbond funds. Do parts ab, and c by usingthe equal variances procedure.

a) Set up the null andalternative hypotheses needed to attempt to establish that the mean annualexpense for stock funds is larger than the mean annual expense for municipalbond funds. Test these hypotheses at the 0.10 level of significance.(Round yoursp2answer to 4 decimal places andt-value to 3 decimal places.)

b) Set up thenull and alternative hypotheses needed to attempt to establish that the meanannual expense for stock funds exceeds the mean annual expense for municipalbond funds by more than 0.5 percent. Test these hypotheses at the 0.10 level ofsignificance.(Round yourt-valueto 3 decimal placesand other answers to 1 decimal place.)

Leave a Reply

Your email address will not be published. Required fields are marked *