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Kipanda Abd

The document presents an individual assignment for a student at Mzumbe University analyzing stock price growth. It tests the hypothesis that the mean stock price growth is above $5 per week using a sample of data, concluding that there is insufficient evidence to support this claim at a 5% significance level. The calculated sample mean of $2.6 indicates the growth rate is significantly lower than the claimed mean.

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5 views3 pages

Kipanda Abd

The document presents an individual assignment for a student at Mzumbe University analyzing stock price growth. It tests the hypothesis that the mean stock price growth is above $5 per week using a sample of data, concluding that there is insufficient evidence to support this claim at a 5% significance level. The calculated sample mean of $2.6 indicates the growth rate is significantly lower than the claimed mean.

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 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

𝐻0 : µ=$5

𝐻1 : 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

𝑍~𝑁(𝜇, 𝜎 2 /𝑛)
𝑋̅−𝜇
𝑍 = 𝜎⁄
√𝑛

𝑍𝑐𝑟𝑖𝑡𝑖𝑐𝑎𝑙 = 𝑍𝛼 = 𝑍0.05 ≥ 1.64

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

4. Computation of the test statistic

𝑥̅ = (4+3+2+3+1+7+2+1+2)/10

𝑥̅ = 2.6

µ=5

𝜎=1

n = 10
2.6−5
𝑍 = 1/√10

𝑍 = −7.59

5. Decision rule

𝑧𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑒𝑑 = -7.59

𝑧𝑐𝑟𝑖𝑡𝑖𝑐𝑎𝑙 = 1.645

Since 𝑍𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑒𝑑 < 𝑍𝑐𝑟𝑖𝑡𝑖𝑐𝑎𝑙

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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