SOLUTION: Socially conscious investors screen out stocks of alcohol and tobacco makers, firms with poor environmental records, and companies with poor labor practices. Some examples of "good

Question 863696: Socially conscious investors screen out stocks of alcohol and tobacco makers, firms with poor environmental records, and companies with poor labor practices. Some examples of "good," socially conscious companies are Johnson and Johnson, Dell Computers, Bank of America, and Home Depot. The question is, are such stocks overpriced? One measure of value is the P/E, or price-to-earnings ratio. High P/E ratios may indicate a stock is overpriced. For the S&P Stock Index of all major stocks, the mean P/E ratio is μ = 19.4. A random sample of 36 "socially conscious" stocks gave a P/E ratio sample mean of x = 18.4, with sample standard deviation s = 4.0. Does this indicate that the mean P/E ratio of all socially conscious stocks is different (either way) from the mean P/E ratio of the S&P Stock Index? Use α = 0.01.
(a) What is the level of significance?
(b)What is the value of the sample test statistic? (Round your answer to three decimal places.)

(c) Find the P-value. (Round your answer to four decimal places.)
Answer by ewatrrr(24785) (Show Source): You can put this solution on YOUR website!



Hi

a) level of significance is .05

b) sample test statistic is 2.13  (degree of Freedom is 15

c) t =  = 1.5,   P(t ≤ 1.5) = .9228

  92.28 % chance the sample mean is ≤ 19.4

  

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