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Swammy 28

The assignment analyzes the stock price growth of a company, testing the hypothesis that the mean growth rate is above $5 per week. Using a sample of ten weeks of stock price changes, the calculated test statistic was -7.59, leading to the conclusion that there is insufficient evidence to reject the null hypothesis at a 5% significance level. The findings indicate that the average growth rate is significantly lower than $5 per week.

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3 views3 pages

Swammy 28

The assignment analyzes the stock price growth of a company, testing the hypothesis that the mean growth rate is above $5 per week. Using a sample of ten weeks of stock price changes, the calculated test statistic was -7.59, leading to the conclusion that there is insufficient evidence to reject the null hypothesis at a 5% significance level. The findings indicate that the average growth rate is significantly lower than $5 per week.

Uploaded by

zabronjoshua003
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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MZUMBE UNIVERSITY

FACULTY OF SCIENCE AND TECHNOLOGY (FST)

STUDENT NAME: ABDUSWAMAD S,K

REG NO: 14326063/T.24

PROGRAM: BSc-IEM-1

COURSE NAME: ENGINEERING STATISTICS

COURSE CODE: EMS 124

TYPE OF WORK: INDIVIDUAL ASSIGNMENT

DATE OF SUBMISSION: 30/05/2025

QUESTION
It is believed that a stock price for a particular company will grow, an average, at a rate of $5
per week with a standard deviation of $1. An investor claims that the stock won’t grow as
quickly. The changes in stock price are recorded for ten weeks and are as follows. $4, $3, $2,
$3, $1, $7, $2, $1, $1, $2. Use this data, along with a 5% level of significance, to test the
claim that the mean will be above $5.
SOLUTION
1. Formulation of the null and alternative hypothesis
H 0: µ=$5
H 1: µ>$5
2. Specification of the level of significance.
Given α=0.05
3. Selection of the suitable test statistic
since σ is known, σ=1
2
Z N (μ , σ /n)
X−μ
Z=
σ /√n
Z critical = Z α = Z 0.05 ≥ 1.64

Therefore, area of critical region is defined as Zcritical ≥1.64

4. Computation of the test statistic


x = (4+3+2+3+1+7+2+1+2)/10
x = 2.6
µ=5
σ =1
n = 10
2.6−5
Z=
1/ √ 10
Z=−7.59

5. Decision rule
z calculated = -7.59
z critical = 1.645
Since Z calculated <¿ Z critical
we fail to reject the null hypothesis

Alternatively, The p-value:

The p-value for z=−7.59 in a right-tailed test would be extremely close to


1. A p-value is the probability of observing a sample mean as extreme as,
or more extreme than, the one calculated, assuming the null hypothesis is
true. A p-value close to 1 indicates that the observed sample mean is not
unusually high.
Since the p-value (which would be very large for a right-tailed test with a
negative z-score) is much greater than α=0.05, we fail to reject the null
hypothesis.

7. Conclusion:

At a 5% level of significance, there is not enough statistical evidence to


support the claim that the true mean rate of stock price growth will be
above $5 per week. The sample data ($2.6 per week) is significantly lower
than $5, which contradicts the claim that the mean will be above $5…

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