SOLUTION: Fidelity Magellan is a large cap growth mutual fund and Fidelity Small Cap Stock is a small cap growth mutual fund. The standard devitation for both funds was computed based on a s

Question 416510: Fidelity Magellan is a large cap growth mutual fund and Fidelity Small Cap Stock is a small cap growth mutual fund. The standard devitation for both funds was computed based on a sample of size 26. For Fidelity Magellan, the sample standard deviation is 8.89%; for Fidelity Small Cap Stock, the sample standard deviation is 13.03. Financial analysts often use the standard deviation as a measure of risk. Conduct a hypothesis test to determine whether the small cap growth fund is risckier than the large cap growth fund. Use a = .05 as the level of significance.
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
Fidelity Magellan is a large cap growth mutual fund and Fidelity Small Cap Stock is a small cap growth mutual fund.
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The standard devitation for both funds was computed based on a sample of size 26.
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For Fidelity Magellan, the sample standard deviation is 8.89% (sig2) ; for Fidelity Small Cap Stock, the sample standard deviation is 13.03% (sig1).
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Financial analysts often use the standard deviation as a measure of risk. Conduct a hypothesis test to determine whether the small cap growth fund is riskier than the large cap growth fund.
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Use a = .05 as the level of significance.
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Ho: sig1-sig2 = 0
Ha: sig1-sig2 > 0
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I ran a 2-Sample FTest on a TI-84
test stat: F = 2.148252
p-value: 0.030706
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Conclusion: since the p-value is less than 5%
Reject Ho. The small-cap is riskier.
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Cheers,
Stan H
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