Question

We are studying mutual bond funds for the purpose of investing in several funds. For this particular study, we want to focus on the assets of a fund and its five-year performance. The question is: Can the five-year rate of return be estimated based on the assets of the fund? Nine mutual funds were selected at random, and their assets and rates of return are shown below.

	Assets				Return						Assets				Return
Fund	($ millions)				(%)				Fund		($ millions)				(%)
AARP High Quality Bond	$	622.2				10.8				MFS Bond A	$	494.5				11.6
Babson Bond L		160.4				11.3				Nichols Income		158.3				9.5
Compass Capital Fixed Income		275.7				11.4				T. Rowe Price Short-term		681.0				8.2
Galaxy Bond Retail		433.2				9.1				Thompson Income B		241.3				6.8
Keystone Custodian B-1		437.9				9.2

Excel Data File

Assets	Return
622.2	10.8
160.4	11.3
275.7	11.4
433.2	9.1
437.9	9.2
494.5	11.6
158.3	9.5
681.0	8.2
241.3	6.8

State the decision rule for 0.05 significance level: H₀: β ≥ 0   H₁: β < 0 (Negative value should be indicated by a minus sign. Round your answer to 3 decimal places.)

Reject H0 if t < ________

Compute the value of the test statistic. (Negative value should be indicated by a minus sign. Round your answer to 3 decimal places.)

Value of the test statistic

The regression equation is yˆ=9.9198−0.00039xy^=9.9198-0.00039x , the sample size is 9, and the standard error of the slope is 0.0032. Use the 0.05 significance level. Can we conclude that the slope of the regression line is less than zero?

(reject OR do not reject)..... HO and conclude the slope may be .......(equal to OR less than OR more than ).. zero

Answer 1