# Refer to Exercise 5.54. a. Is there sufficient evidence that the median annual rate of return for…

Refer to Exercise 5.54.

a. Is there sufficient evidence that the median annual rate of return for the two mutual funds is greater than 10%?

b. Is there sufficient evidence that the mean annual rate of return for the two mutual funds is greater than 10%?

Exercise 5.54

In an attempt to increase the amount of money people would receive at retirement from Social Security, the U.S. Congress during its 1999 session debated whether a portion of Social Security funds should be invested in the stock market. Advocates of mutual stock funds reassured the public by stating that most mutual funds would provide a larger retirement income than the income currently provided by Social Security. The annual rates of return of two highly recommended mutual funds for the years 1989 through 1998 are given here. (The annual rate of return is defined as (P1  P0)/P0, where P0 and P1 are the prices of the fund at the beginning and end of the year, respectively.)

a. For both fund A and fund B, estimate the mean and median annual rates of return, and construct a 95% confidence interval for each.

b. Which of the parameters, the mean or median, do you think best represents the annual rate of return for fund A and for fund B during the years 1989 through 1998? Justify your answer.

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