A Portfolio Manager Claims That the Mean Annual Return on One

Essay

A portfolio manager claims that the mean annual return on one of the mutual funds he manages exceeds 8%. To substantiate his claim, he states that over the past 10 years, the mean annual return for the mutual fund has been 9.5% with a sample standard deviation of 1.5%. Assume annual returns are normally distributed.
A) Specify the competing hypotheses to test the portfolio manager's claim.
B) Calculate the value of the test statistic.
C) At the 5% significance level, use the p-value approach to state the decision rule.
D) Is the portfolio manager's claim substantiated by the data? Explain.