Reference no: EM132413581

Recent studies indicate that in order to be globally competitive, firms must form global strategic partnerships. An investment banker wants to test whether the return on investment for international ventures is different from return on investment for similar domestic ventures. It was expected that the mean return on international (domestic) ventures might depend in an important way on the firm involved and the banker wanted to control for this. A sample of 12 firms that recently entered into ventures with foreign companies is available. For each firm, the returns on investment for the international venture (I) and a similar domestic ventures (D) are given:

D(%) 10 12 14 12 12 17 9 15 9 11 7 15

I(%) 11 14 15 11 12 16 10 13 11 17 9 19

d = D - I 1 2 1 -1 0 -1 1 -2 2 6 2 4

Assuming that the differences follow the normal distribution N(µ, σ). Based on the above data, it has been found that ¯d = 1.25 and sd = 2.22077. (1) Assume that σ = 2. At 5% level of significance, test if there is a difference between the mean returns on international ventures and the mean returns on domestic ventures. Find the P-value. (2) Assume that σ is unknown. At 5% level of significance, test if there is a difference between the mean returns on international ventures and the mean returns on domestic ventures.