Answer: H₁: μ > 14%

The correct answer is B: H₁: μ > 14%. **Explanation:** In hypothesis testing: 1. The **null hypothesis (H₀)** is typically a statement of no effect or no difference, or the status quo that we want to test against. 2. The **alternative hypothesis (H₁)** is what the researcher wants to prove or find evidence for. In this case, the researcher wants to test that the mean return is **greater than 14%**. Therefore: - The null hypothesis would be H₀: μ ≤ 14% (mean is less than or equal to 14%) - The alternative hypothesis would be H₁: μ > 14% (mean is greater than 14%) This is a **one-tailed test** (specifically, a right-tailed test) because we're only interested in whether the mean is greater than 14%, not whether it's different in either direction. **Why the other options are incorrect:** - **A (H₁: μ ≠ 14%)**: This would be for a two-tailed test where we want to test if the mean is different from 14% in either direction. - **C (H₁: μ < 14%)**: This would be for testing if the mean is less than 14% (left-tailed test). - **D (H₀: μ < 14%)**: This is a null hypothesis statement, not an alternative hypothesis, and it's for testing if the mean is less than 14%. The text confirms: "Since the researcher wants to test that if the mean of 50 small-cap stocks is greater than 14%, the null hypothesis is H₀: μ ≤ 14% and the alternative hypothesis is H₁: μ > 14%."

Author: Nikitesh Somanthe