Question

The Chartered Financial Analyst (CFA) designation is fast becoming a requirement for serious investment professionals. It is an attractive alternative to getting an MBA for students wanting a career in investment. A student of finance is curious to know if a CFA designation is a more lucrative option than an MBA. He collects data on 37 recent CFAs with a mean salary of $141,000 and a standard deviation of $39,000. A sample of 51 MBAs results in a mean salary of $132,000 with a standard deviation of $20,000.

Assume that μ₁ is the population mean for individuals with a CFA designation and μ₂ is the population mean of individuals with MBAs. (You may find it useful to reference the appropriate table: z table ort table)

a. Set up the hypotheses to test if a CFA designation is more lucrative than an MBA at the 1% significance level.

• H₀: μ₁ − μ₂ = 0; H_A: μ₁ − μ₂ ≠ 0

• H₀: μ₁ − μ₂ ≥ 0; H_A: μ₁ − μ₂ < 0

• H₀: μ₁ − μ₂ ≤ 0; H_A: μ₁ − μ₂ > 0

b-1. Calculate the value of the test statistic. Do not assume that the population variances are equal. (Round all intermediate calculations to at least 4 decimal places and final answer to 2 decimal places.)

b-2. Find the p-value.

• p-value 0.10
• 0.05 p-value < 0.10
• 0.025 p-value < 0.05
• 0.01 p-value < 0.025

• p-value < 0.01

c. At the 1% significance level, is a CFA designation more lucrative than an MBA?

	H0. At the 1% significance level, we		conclude that
the CFA designation is more lucrative than an MBA.

Answer 1