Question 1: You have looked at ABC capital’s fund which has been in existence for 24 months. During this time, its mean monthly return has been 1.5% with a monthly sample standard deviation of 3.6%. Given the market risk and according to the pricing model, it was expected to have earned 1.1% mean monthly return. Assuming the results are normally distributed, are the actual results consistent with an underlying or population mean monthly return of 1.1%?
We are told to identify the test statistic. The example given has this as:
t-test: (n-1) = 24-1 = 23 degrees of freedom.
Question 2:
“ABC discovered that defaulted bonds for the petro-chemical industry had higher recovery rates than bonds for other industries. Could the difference in the recovery rates be caused by a larger percentage of senior bonds in the petro-chemical sector?”
We are told that the two populations are normally distruibuted and that the samples are independent. One of the questions asks to “calculate the test statistic to test the null hypothesis” and instead of relying on degrees of freedom as every other question that asks this does, it uses the given test statistic formula. It then asks me to specifically find the modified degrees of freedom. Why does every other question have me find degrees of freedom for the test statistic but this one does not?
Thanks!