77. Investment. Investment style plays a role in constructing a mutual fund. Many individual stocks can be grouped into two distinct groups: Growth and Value. A Growth stock is one with high earning potential and often pays little or no dividends to shareholders. Conversely, Value stocks are commonly viewed as steady or more conservative stocks with a lower earning potential. A family is trying to decide what type of funds to invest in. An independent advisor claims that Value Mutual Funds provided an annualized return of greater than 8% over a recent 5-year period.

Below are the summary statistics for the 5-year return for a random sample of such Value funds.

Test the hypothesis that the mean 5-year return for value funds is greater than 8%, assuming a significance level of 5%. What does this evidence say about the portfolio managers’ claim that the annualized 5-year return was greater than 8%? State your conclusion.

Transcribed Image Text:

Variable 5 yr Return N Mean SE Mean StDev 35 8.418 0.493 2.916 Minimum 01 Median 03 Maximum 2.190 6.040 7.980 10.840 14.3201