HW 3&4

MGT 3310 Homework 4 Summer I 2022

Chapter 11

1. To analyze the risk, or volatility, associated with investing in Chevron Corporation common stock, a sample of the monthly total percentage return for 12 months was taken. The returns for the 12 months of 2005 are shown here (CompuStat, Feb 24, 2006). Total return is price appreciation plus any dividend paid.

Month	Return (%)
Jan	3.60
Feb	14.86
Fi	-6.07
Apr	-10.82
May	4.29
Jun	3.98
Jul	3.74
Aug	6.62
Sep	5.42
Oct	-11.83
Nov	1.21
Dec	-0.94

a. Compute the sample variance and sample standard deviation as a measure of volatility of monthly total return for Chevron.

b. Construct a 95% confidence interval for the population variance.

c. Construct a 95% confidence interval for the population standard deviation.

2. Fidelity Magellan is a large cap growth mutual fund and Fidelity Small Cap Stock is a small cap growth mutual fund (Morningstar Funds 500, 2006). The standard deviation for both funds was computed based on a sample of size 26. For Fidelity Magellan, the sample standard deviation is 8.89%; for Fidelity Small Cap Stock, the sample standard deviation is 13.03%. Financial analysts often use the standard deviation as a measure of risk. Conduct a hypothesis test to determine whether the small cap growth fund is riskier than the large cap growth fund. Use α = .05 as the level of significance.

3. The filling variance for boxes of cereal is designed to be 0.02 or less. A sample of 41 boxes of cereal shows a sample standard deviation of 0.16 ounces. Use α = .05 to determine whether the variance in the cereal box fillings is exceeding the design specification.

Due date: Jun 21, 11:59pm

Note: Homework solution must be submitted electronically to Homework 4 folder in “Assignments” on D2L.

It is your choice to submit all of your work or just the final answer only. If you only submit the final answer and the answer is wrong, you will lose all the points assigned to that question. If you also show the steps how you get that answer, you still can earn partial credit as long as the steps are not completely wrong.