2. In conducting your test for question 1, you assumed equal variances. Complete

Question

2. In conducting your test for question 1, you assumed equal variances. Complete a test to determine whether the variances are equal – use the “folded” or “right-tail” test.

(4)       a. What is the hypothesis you will test?

(4)       b. Calculate the test statistic.

(4)       c. Determine the P-value for the test statistic.

(4)       d. At the 5% level of significance, does it appear you can safely assume the variances for Accord and Camry prices are equal? Explain – what do you conclude about the two variances.

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Explanation / Answer

Question a)

Null Hypothesis:

H0: s1^2 = s2^2

Alternative Hypothesis:

H1: s1^2 ¹ s2^2

Question b)

By using excel we get the sample variances as follows:

=var(data range)

s1^2 = 3190790

s2^2 = 1630330

F = s1^2/s2^2

   = 3190790 / 1630330

F = 1.957

The value of the test statistics is 1.957

Question c)

p-value:

By using excel function we get the p-value here

=FDIST(1.957,23,14)

= 2*0.0976

= 0.1952

The p-value is 0.1952

Question d)

Here the p-value is greater than the level of significance (0.1952 >.05) we fail to reject the null hypothesis. There is sufficient evidence to conclude that the variances for Accord and Camry are equal.

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