The price to earnings ratio (P/E) is an important tool in financial work. A random sample of 14 large U.S. banks (J. P. Morgan, Bank of America, and others) gave the following P/E ratios.† 24 16 22 14 12 13 17 22 15 19 23 13 11 18 The sample mean is x ≈ 17.1. Generally speaking, a low P/E ratio indicates a "value" or bargain stock. Suppose a recent copy of a magazine indicated that the P/E ratio of a certain stock index is ? = 18. Let x be a random variable representing the P/E ratio of all large U.S. bank stocks. We assume that x has a normal distribution and ? = 3.5. Do these data indicate that the P/E ratio of all U.S. bank stocks is less than 18? Use ? = 0.05. a) What is the level of significance? b) Compute the z value of the sample test statistic. (Round your answer to two decimal places.) c) Find (or estimate) the P-value. (Round your answer to four decimal places.)
The price to earnings ratio (P/E) is an important tool in financial work. A random sample of 14 large U.S. banks (J. P. Morgan, Bank of America, and others) gave the following P/E ratios.†
24 16 22 14 12 13 17 22 15 19 23 13 11 18
The sample
Generally speaking, a low P/E ratio indicates a "value" or bargain stock. Suppose a recent copy of a magazine indicated that the P/E ratio of a certain stock index is ? = 18. Let x be a random variable representing the P/E ratio of all large U.S. bank stocks. We assume that x has a
a) What is the level of significance?
b) Compute the z value of the sample test statistic. (Round your answer to two decimal places.)
c) Find (or estimate) the P-value. (Round your answer to four decimal places.)
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