Question

For the S&P Stock Index of all major stocks, the mean P/E
ratio is u=19.4. A random sample of 36 “socially conscious” stocks
gave a P/E ratio sample mean of xbar= 17.9. Assume the standard
deviation is *σ=5.2.* Use a hypothesis test at the a= 0.10
significance level to determine whether the mean P/E ratio for all
socially conscious stocks is different either way from the mean P/E
ratio of the S&P Stock Index.

Construct a 90% confidence interval for the mean P/E ratio for all socially conscious stocks and interpret the confidence interval in a complete sentence.

Answer #1

For the S&P Stock Index of all major stocks, the mean P/E
ratio is u=19.4. A random sample of 36 “socially conscious” stocks
gave a P/E ratio sample mean of xbar= 17.9. Assume the standard
deviation is σ=5.2. Use a hypothesis test at the a= 0.10
significance level to determine whether the mean P/E ratio for all
socially conscious stocks is different (either way) from the mean
P/E ratio of the S&P Stock Index.
what is the test statistic, p...

Socially conscious investors screen out stocks of alcohol and
tobacco makers, firms with poor environmental records, and
companies with poor labor practices. Some examples of "good,"
socially conscious companies are Johnson and Johnson, Dell
Computers, Bank of America, and Home Depot. The question is, are
such stocks overpriced? One measure of value is the P/E, or
price-to-earnings ratio. High P/E ratios may indicate a stock is
overpriced. For the S&P Stock Index of all major stocks, the
mean P/E ratio...

Socially conscious investors screen out stocks of alcohol and
tobacco makers, firms with poor environmental records, and
companies with poor labor practices. Some examples of "good,"
socially conscious companies are Johnson and Johnson, Dell
Computers, Bank of America, and Home Depot. The question is, are
such stocks overpriced? One measure of value is the P/E, or
price-to-earnings ratio. High P/E ratios may indicate a stock is
overpriced. For the S&P Stock Index of all major stocks, the
mean P/E ratio...

Socially conscious investors screen out stocks of alcohol and
tobacco makers, firms with poor environmental records, and
companies with poor labor practices. Some examples of "good,"
socially conscious companies are Johnson and Johnson, Dell
Computers, Bank of America, and Home Depot. The question is, are
such stocks overpriced? One measure of value is the P/E, or
price-to-earnings ratio. High P/E ratios may indicate a stock is
overpriced. For the S&P Stock Index of all major stocks, the
mean P/E ratio...

The price to earnings ratio (P/E) is an important tool in
financial work. A random sample of 14 large U.S. banks (J. P.
Morgan, Bank of America, and others) gave the following P/E
ratios.†
24 16 22 14 12 13 17 22 15 19 23 13 11 18
The sample mean is x ≈ 17.1.
Generally speaking, a low P/E ratio indicates a "value" or
bargain stock. Suppose a recent copy of a magazine indicated that
the P/E ratio of...

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