Let x be a random variable representing dividend yield of Australian bank stocks. We may assume that x has a normal distribution with 2.8%. A random sample of 20 Australian bank stocks has a sample mean of 8.97%. For the entire Australian stock market, the mean dividend yield is 7.3%. Do these data indicate that the dividend yield of all Australian bank stocks is higher than 7.3%? Use a=.01. Are the data statistically significant at the given level of significance? Based on your answers, will you reject or fail to reject the null hypothesis?
Continuous Probability Distributions
Probability distributions are of two types, which are continuous probability distributions and discrete probability distributions. A continuous probability distribution contains an infinite number of values. For example, if time is infinite: you could count from 0 to a trillion seconds, billion seconds, so on indefinitely. A discrete probability distribution consists of only a countable set of possible values.
Normal Distribution
Suppose we had to design a bathroom weighing scale, how would we decide what should be the range of the weighing machine? Would we take the highest recorded human weight in history and use that as the upper limit for our weighing scale? This may not be a great idea as the sensitivity of the scale would get reduced if the range is too large. At the same time, if we keep the upper limit too low, it may not be usable for a large percentage of the population!
Let x be a random variable representing dividend yield of Australian bank stocks. We may assume that x has a
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