Reference no: EM13574926

Question:

The proportion of a companys earnings paid out to its shareholders in the form of dividends is called the company's dividend payout ratio. A frequency distribution of dividend payout ratios (expressed as percentages) for a sample of 125 companies is shown in the following table. Ten of these companies paid no dividend.

Dividend payout ratio (%)      Frequency
0 up to 10                                  13
10 up to 20                                 7
20 up to 30                                10
30 up to 40                                23
40 up to 50                                28
50 up to 60                                21
60 up to 70                                14
70 up to 80                                 5
80 up to 90                                 3
90 up to 100                               1

Part (a):

Using a significance level of 10%, test the hypothesis that dividend payout ratios are normally distributed. (HINT: Combine the three highest classes, since the expected frequencies of the two highest classes are small).

Part (b):

Repeat part (a), considering only companies that paid a dividend. (HINT: Combine the two lowest and three highest classes, since the expected frequencies are small).