You are analyzing a unit trust fund ETA Value which has been in existence for 24

Question

You are analyzing a unit trust fund ETA Value which has been in existence for 24 months. During this period, the fund has recorded mean monthly returns of 1.50 percent with standard deviation of 3.60 percent. According to a financial model, unit trust funds under the Value category have recorded 1.10 percent average monthly returns during this period. Assuming returns are normally distributed, test at alpha = 0.05 whether the mean monthly returns of the fund is consistent with population mean monthly returns of funds under the Value category? (b) Based on the same sample of ETA Value in 3(a), it is said that the sample standard deviation of monthly returns is 3.60 percent. Securities report states that standard deviation of monthly returns for Value investment strategy practiced by ETA is less than 4 percent. Test the claim at alpha = 0.05. (b) Based on the same sample of ETA Value in 3(a), it is said that the sample standard deviation of monthly returns is 3.60 percent. Securities report states that standard deviation of monthly returns for Value investment strategy practiced by ETA is less than 4 percent. Test the claim at alpha = 0.05.

Explanation / Answer

(a)

Excel formula:

(B)

Excel formula:

mean= 1.5 SD= 3.6 X= 1.1 n= 24 we use 1 sample 2 sided t-test H0: both results are consistent Ha: both results are not consistent test stat t= 0.544331 p-value 0.591452 p-value>.05; cant reject H0; conclude that both returns are consistent

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