QUESTION SET #2 – SOLUTIONS 9/27/16
Problem #1: An international investment corporation wants to compare the variability of stock
prices of emerging companies in China and Japan. They selected a sample of 31 companies
from Japan. The mean stock price in Japan was 142.32 with a 24.27 standard deviation. The
corporation also took a sample of 25 companies from China and found that the mean stock price
was 57.80 with the standard deviation of 17.68. At α = 0.05 level, can the corporation conclude
that the average stock prices of emerging companies in Japan are equal to those in China?
Sample Data
Japan (n1) China (n2)
𝑥1 = $142.32 𝑥2 = $57.80
s1 = 24.27 s2 = 17.68
n1 = 31 companies n2 = 25 companies
(1) What are the correct null and alternative hypotheses?
H0: μ1 = μ2
H1: μ1 ≠ μ2
(2) What is the correct critical value for this test?
n2 < 30 → t-test, two-tailed
α = .05; df = n1 + n2 – 2 = 31 + 25 – 2 = 54 → tcrit = ±2.021 (t.025, 40 df)
