Mutual funds are classified asloadorno-loadfunds. Load funds require an investor to pay an initial fee based on a percentage of the amount invested in the fund. The no-load funds do not require this initial fee. Some financial advisors argue that the load mutual funds may be worth the extra fee because these funds provide a higher mean rate of return than the no-load mutual funds. A sample of 30 load mutual funds and a sample of 30 no-load mutual funds were selected. Data were collected on the annual return for the funds over a five year period. The data are contained in the data set Mutual. The data for the first five load and first five no-load mutual funds are as follows.
Mutual Funds—Load
Return
Mutual Funds—No Load
American National Growth
15.51
Amana Income Fund
13.24
Arch Small Cap Equity
14.57
Berger One Hundred
12.13
Bartlett Cap Basic
17.73
Columbia International Stock
12.17
Calvert World International
10.31
Dodge & Cox Balanced
16.06
Colonial Fund A
16.23
Evergreen Fund
17.61
a. FormulateH0 andHa such that rejection ofH0 leads to the conclusion that the load mutual funds have a higher mean annual return over the five-year period.
b. Use the 60 mutual funds in the data set Mutual to conduct the hypothesis test. What is thep-value? Atα= .05, what is your conclusion?
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