Suppose there are 5,547 daily observations for the returns of stocks in the Fortune 500 portfolio. The portfolio average return is 0.0213 with a standard deviation of 0.7832. Formally state the hypothesis test on whether the return on the Fortune 500 portfolio is different from 0. Use a two-tailed test. Using the confidence interval method, test your hypothesis at the 90% confidence level. Explicitly state the results of the test. Using the t-test method, determine at which conventional significance levels you can reject the null hypothesis and refute your friend’s claim (if any).

Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter13: Probability And Calculus
Section13.2: Expected Value And Variance Of Continuous Random Variables
Problem 10E
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  1. Suppose there are 5,547 daily observations for the returns of stocks in the Fortune 500 portfolio. The portfolio average return is 0.0213 with a standard deviation of 0.7832.
    1. Formally state the hypothesis test on whether the return on the Fortune 500 portfolio is different from 0. Use a two-tailed test.
    2. Using the confidence interval method, test your hypothesis at the 90% confidence level. Explicitly state the results of the test.
    3. Using the t-test method, determine at which conventional significance levels you can reject the null hypothesis and refute your friend’s claim (if any).
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