Problem

Colonial Funds claims to have a bond fund which has maintained a mean share price of $\$ 14.00$. They claim that the standard deviation of the share price is 0.14 . To test this claim, the investor randomly selects 29 days during the last year. He finds an average share price of $\$ 13.80$ with a standard deviation of 0.0772 . Can the investor conclude that the share price of the bond fund varies by less than Colonial Funds claims at $\alpha=0.01$ ? Step 2 of 5 : Determine the critical value(s) of the test statistic. If the test is two-tailed, separate the values with a comma. Round your. answer to three decimal places. Answer Tables Keypad How to enter your answer (opens in new window) Keyboard Shortcuts Previous step answers

Solution

Step 1 :The problem is asking for the critical value(s) of the test statistic for a two-tailed test. The significance level is given as 0.01. In a two-tailed test, the significance level is divided by 2, and we look up the critical value for 0.005 in the z-table.

Step 2 :The critical value is the z-score such that the area to its right (for an upper-tailed test) or to its left (for a lower-tailed test) is equal to the significance level. Since this is a two-tailed test, we will have two critical values, one positive and one negative.

Step 3 :Let's calculate the critical values. For a significance level of 0.005, the positive critical value is approximately 2.576 and the negative critical value is approximately -2.576.

Step 4 :\(\boxed{2.576, -2.576}\) are the critical values for the two-tailed test at a significance level of 0.01.

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