1.Suppose that an insurance agent fot 20th century insurance claims he sells is

Question

1.Suppose that an insurance agent fot 20th century insurance claims he sells is $700/yr.
A sample of 50 customers yields a mean of $650 and a standard deviation of s=$150. You decide to test his claim @ the a=0.05 significance level.
If the hypothess are: Ho:u=700 H1: u=700
With criical values of+_ 1.96, compute the smple statistic, and choose the appropriate conclusion.

2. Suppose that a CEO Company claims his employees severance pkg. is 450,000. You decide to test thi claim @ significance level of a=0.04. A sample of 40 employees yield mean of 414,845 with sample std. dev of s=$125,575. Compute the probability of geting a sampl statistic at least as extreme as z=-.77 and interpret this probability value.

Explanation / Answer

1. Given n=50, xbar=650, s=150

Ho:u=700
H1: u not equal to 700

The test statistic is
Z=(xbar-)/(s/n)

=(650-700)/(150/sqrt(50))

= -2.36

Since Z= -2.36<-1.96, we reject Ho.

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2. the probability of geting a sampl statistic at least as extreme as z=-.77 is

2*P(Z>=-0.77) = 0.7793 is p-value.

Since p-value is larger than a=0.04, we do not reject Ho.

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