• Colin, a stockbroker at Critical Securities, reported that the mean rate of return on a sample of 10 software stocks was 12.6 percent with a standard deviation of 3.9 percent.

• The mean rate of return on a sample of 8 utility stocks was 10.9 percent with a standard deviation of 3.5 percent. At the .05 significance level, can Colin conclude that there is more variation in the software stocks?

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• Step 1: State null and alternate hypotheses

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• Step 2: Select a level of significance

• Step 3: Identify the test statistic, find critical value, and draw

• Step 4: Formulate a decision rule

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Step 5: Take a random sample, compute the test statistic, compare it to critical value, and make decision to reject or not reject null and hypotheses