Using 95 significance level Recent studies indicate that in

Recent studies indicate that in order to be globally competitive, firms must form global strategic partnerships. An investment banker wants to test whether the returm on investment for international ventures is different from retum on investment for similar domestic ventures. A sample of 12 firms thiat recently entered into ventures with foreign companies is availoble. For ench firm, the retun on investment for both the international-venture (I) and a sinilar domestic venture (D) is given D(%): 10 12 14 12 12-17 915 8.5 11715 I(%): 11 14 15 1112.5 16 10 13 10.5 17 9 19 Assuming that these firms represent a random sample from the population of all firms involved in global strategic partnerships, can the investment banker conclude that there are differences between average returns on domestic ventures and average returns on international ventures? igaifienson lewal. Assume the povulation of paired differences is (approxinately) nonmal.

Solution

Here we have to test the hypothesis that,

H0: mu1=mu2. Vs H1:mu1 not=mu2

Where mu1 is population mean of returns on domestic venture

Mu2 is population mean of returns on international ventures

AlPha = 0.05

Here we use t-test sample size is small and population standard deviation is unknown.

first we have to test the hypothesis that variances are equal or not.

Hypothesis for the test is,

H0: variances are equal

H1: variances are not equal

The test statistic is,

F= larger variance / smaller variance

this we can done by using Ti-83 calculator.

Steps:

Stat-- enter data -- stat--tests -- D:2sampleFTest -- Enter--inpt: data -- list1L1 --list2 L2-- freq1:1--freq2:2-- select first option -- calculate

Output is,

F=0.9324

P-value = 0.9097

P-value > 0.05

Accept H0

Variances are equal.

Use pooled variance.

Again for testing two means we use ti-83 calculator.

Steps:

Stat -- tests -- 4:2sampTTest -- enter-- inpt: data -list1 --L1 --list2: L2 -- freq1:1 --freq2:2 --first option -- pooled: YES-- calculate--enter

t=-1.04098

P-value = 0.3092

P-value > 0.05

Accept H0 at 5% leveof of significance.

There is not any difference between average returns on domestic ventures and average returns on international ventures.