Question: A lot of investors have been reading about something called the "new-fund effect." That's the tendency of new funds to outperform their older peers because of any one of a number of factors: better access to initial public offerings, more motivated managers, or better spreads on trades. However, despite the potential growth benefits of new funds, their volatility makes many investors uncomfortable. Consider a sample of 20 newly created mid-cap mutual funds and a sample of 20 newly created small-cap mutual funds randomly selected from all mutual funds that are less than 18 months old. The data are given below.

1. Is there sufficient evidence that there is a difference in the variance of newly created mid-cap vs small-cap mutual funds? Use a level of significance of 10 percent.
2. Just for the fun of it, using the results from part a, test to see whether or not there is a statistically significant difference between the average annualized performances of the mid-cap funds versus the small-cap funds. Do this test at level of significance of 10 percent.

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