Question

Suppose that the percentage annual return you obtain when you invest a dollar in gold or the stock market is dependent on the general state of the national economy as indicated below. For example, the probability that the economy will be in "boom" state is 0.15. In this case, if you invest in the stock market your return is assumed to be 25%; on the other hand if you invest in gold when the economy is in a "boom" state your return will be minus 30%. Likewise for the other possible states of the economy. Note that the sum of the probabilities has to be 1--and is.

State of economy	Probability	Market Return	Gold Return
Boom	0.15	25%	(-30%)
Moderate Growth	0.35	20%	(-9%)
Week Growth	0.25	5%	35%
No Growth	0.25	(-14%)	50%

I found the expected Return total for each,

Return of Stocks = (.15*25)+(.35*20)+(.25*5)+(.25+-14) = 8.5%

Return of Gold = (.15*-30)+(.35*-9)+(.25*35)+(.25+50) = 13.6%

but need the H0, Ha, and a z-test, p-value and the chi-critical score.. How do I find any of that for this problem?

It's not stated in the question but my teacher is asking for this information, and I'm lost as to why or how to get it.

Answer 1