The Chartered Financial Analyst (CFA) designation is fast becoming a requirement for serious investment professionals. It is an attractive alternative to getting an MBA for students wanting a career in investment. A student of finance is curious to know if a CFA designation is a more lucrative option than an MBA. He collects data on 41 recent CFAs with a mean salary of $146,000 and a standard deviation of $53,000. A sample of 52 MBAs results in a mean salary of $133,000 with a standard deviation of $26,000. Assume that μ1 is the population mean for individuals with a CFA designation and μ2 is the population mean of individuals with MBAs.

a. Set up the hypotheses to test if a CFA designation is more lucrative than an MBA at the 10% significance level.

a) H0: μ1 − μ2 = 0; HA: μ1 − μ2 ≠ 0

b) H0: μ1 − μ2 ≥ 0; HA: μ1 − μ2 < 0

c) H0: μ1 − μ2 ≤ 0; HA: μ1 − μ2 > 0

b-1. Calculate the value of the test statistic.

Test Statistic:

b-2. Find the p-value.

p-value 0.10

a) 0.05 p-value < 0.10

b) 0.025 p-value < 0.05

c) 0.01 p-value < 0.025

d) p-value < 0.01

c. At the 10% significance level, is a CFA designation more lucrative than an MBA?

H0. At the 10% significance level, we conclude that the CFA designation is more lucrative than an MBA