QUESTION 7

1. The Federal Reserve Board of Governors recently changed thereporting of its stance on monetary policy from what they termed a"policy bias" to a "balance of risks". A researcher wished to seewhether there had been a change in the way financial analysts wereinterpreting the change in reporting. When the "policy bias"reporting method was used, it was known that only 35% of theBoard's decisions were correctly anticipated by analysts in theirreports. For the "balance of risks" method, the researcher took arandom sample of 56 analysts' reports and found that 26 of thesecorrectly anticipated the Board's decision. Assume that the test isto be carried out at the 10% level.

   1. State the direction of the alternative hypothesis used totest whether the proportion of analysts correctly anticipating theBoard's decision had changed. Type gt (greater than), ge (greaterthan or equal to), lt (less than), le (less than or equal to) or ne(not equal to) as appropriate in the box.
   2. Calculate the test statistic, reporting your answer to twodecimal places.
   3. Use the tables in the textbook to determine the p-value for thetest (answer to 4 decimal places)
   4. Is the null hypothesis rejected for this test? Type yes orno.
   5. Disregarding your answer for 4, if the null hypothesis wasrejected at the 10% level, would the predictive accuracy of theclaims in analysts' reports appear to have changed under the newsystem? Type yes or no.