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    Statistics Test Mutual Funds Question

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    Please help with the following statistics test and mutual funds problems. Step by step calculations are given.

    Fidelity Magellan is a large cap growth mutual fund and Fidelity Small Cap Stock is a small cap growth mutual fund (Morningstar Funds 500, 2006). The standard deviation for both funds was computed based on a sample size of 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 riskier than the large cap growth fund. Use an alpha of 0.05 as the level of significance.

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    Solution Preview

    Let us denote by sigma1^2 and sigma 2^2 the variances for small and large cap growth funds. Then we could test.
    Null hypothesis H0: sigma1^2 <= sigma2^2
    Alternative ...

    Solution Summary

    This solution helps with statistics and mutual funds questions. Step by step calculations are given for each.