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The following data represent the yields for a five-year CD for ten banks in city A and eight banks in city B. At the 0.05 level of significance, is there evidence of a difference in the variance of the yield between money market accounts and five-year CDs? Assume that the population yields are normally distributed City A. 

City A City B
1.51, 1.37, 1.26, 1.06, 0.84, 0.56, 0.58, 0.38, 0.31, 0.21 1.56, 1.35, 1.08, 0.53, 0.31, 1.03, 0.81, 0.48

Determine the hypothesis

Calculate the FSTAT test statistic.

Determine the p-value for this F-TEST

Reach a decision

Variances using F-test, 

F  = S1^2/S2^2 , Remember that the larger variance goes to the top, 

The variance for City A  is = 0.220 and that for City B is 0.194

F-stat = 0.220/0.194  =  1.134

The p-value : Use Excel to get the p-value =F.DIST.RT(1.134,9,8)  =  0.435

Do not reject the null hypothesis because the p-value is large. 




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