21. An investor is considering two types of investment. She is quite satisfied that the expected return on investment 1 is higher than the expected return on investment 2. However, she is quite concerned that the risk associated with investment 1 is higher than that of investment 2. To help make her decision, she randomly selects seven monthly returns on investment 1 and ten monthly returns on investment 2. She finds that the sample variances of investments 1 and 2 are 225 and 118, respectively. a) Can she infer at the 5% significance level that the population variance of investment 1 exceeds that of investment 2? b) Estimate with 95% confidence the ratio of the two population variances. c) Briefly describe what the interval estimate tells you.
21. An investor is considering two types of investment. She is quite satisfied that the expected return on investment 1 is higher than the expected return on investment 2. However, she is quite concerned that the risk associated with investment 1 is higher than that of investment 2. To help make her decision, she randomly selects seven monthly returns on investment 1 and ten monthly returns on investment 2. She finds that the sample variances of investments 1 and 2 are 225 and 118, respectively. a) Can she infer at the 5% significance level that the population variance of investment 1 exceeds that of investment 2? b) Estimate with 95% confidence the ratio of the two population variances. c) Briefly describe what the interval estimate tells you.
Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter7: Distance And Approximation
Section7.3: Least Squares Approximation
Problem 31EQ
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21. An investor is considering two types of investment. She is quite satisfied that the
expected return on investment 1 is higher than the expected return on investment 2.
However, she is quite concerned that the risk associated with investment 1 is higher than
that of investment 2. To help make her decision, she randomly selects seven monthly
returns on investment 1 and ten monthly returns on investment 2. She finds that the
sample variances of investments 1 and 2 are 225 and 118, respectively.
a) Can she infer at the 5% significance level that the population variance of investment 1
exceeds that of investment 2?
b) Estimate with 95% confidence the ratio of the two population variances.
c) Briefly describe what the interval estimate tells you.
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