1. A portfolio manager advertises that its portfolio monthly returns have a standard deviation equal to 3%. You want to verify whether this claim is valid or not. You collect monthly returns for the last three years and measures the standard deviation of 3.7%.
2. State the Null and alternative Hypotheses.
3. Assuming that the portfolio's returns are normally distributed, determine if the calculated standard deviation is different than the advertised one at a 5% level of significance.
4. Make a decision based on the results of the test.