Mechanic

James Ambercrombie believes that the average return on equity in the utility industry, µ, is greater than 10%. What are the null (H0) and alternative (Ha) hypotheses for his study?

A) H0: µ ≤ 0.10 versus Ha: µ > 0.10.

B) H0: µ < 0.10 versus Ha: µ > 0.10.

C) H0: µ > 0.10 versus Ha: µ < 0.10.

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This is a one-sided alternative because of the "greater than" belief.

Mechanic

Which one of the following is the most appropriate set of hypotheses to use when a researcher is trying to demonstrate that a return is greater than the risk-free rate? The null hypothesis is framed as a:

A) less than statement and the alternative hypothesis is framed as a greater than or equal to statement.

B) less than or equal to statement and the alternative hypothesis is framed as a greater than statement.

C) greater than statement and the alternative hypothesis is framed as a less than or equal to statement.

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If a researcher is trying to show that a return is greater than the risk-free rate then this should be the alternative hypothesis. The null hypothesis would then take the form of a less than or equal to statement.

Mechanic

Which one of the following best characterizes the alternative hypothesis? The alternative hypothesis is usually the:

A) hoped-for outcome.

B) hypothesis to be proved through statistical testing.

C) hypothesis that is accepted after a statistical test is conducted.

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The alternative hypothesis is typically the hypothesis that a researcher hopes to support after a statistical test is carried out. We can reject or fail to reject the null, not 'prove' a hypothesis.

Mechanic

Jill Woodall believes that the average return on equity in the retail industry, µ, is less than 15%. What is null (H0) and alternative (Ha) hypothesis for her study?

A) H0: µ ≥ 0.15 versus Ha: µ < 0.15.

B) H0: µ < 0.15 versus Ha: µ = 0.15.

C) H0: µ = 0.15 versus Ha: µ ≠ 0.15.

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This is a one-sided alternative because of the “less than” belief. We expect to reject the null.

Mechanic

James Ambercrombie believes that the average return on equity in the utility industry, µ, is greater than 10%. What is null (H0) and alternative (Ha) hypothesis for his study?

A) H0: µ = 0.10 versus Ha: µ ≠ 0.10.

B) H0: µ ≥ 0.10 versus Ha: µ < 0.10.

C) H0: µ ≤ 0.10 versus Ha: µ > 0.10.

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This is a one-sided alternative because of the “greater than” belief. We expect to reject the null.

Mechanic

What is the most common formulation of null and alternative hypotheses?

A) Less than for the null and greater than for the alternative.

B) Equal to for the null and not equal to for the alternative.

C) Greater than or equal to for the null and less than for the alternative.

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The most common set of hypotheses will take the form of an equal to statement for the null and a not equal to statement for the alternative.