Week 7 Examples

For Week 7 Module

Week 7 Examples

Week 7 Examples

• Read the question carefully. They say the claim is that their weekly losses are no more than $2500

• This means the claim would be that the weekly losses are less than or equal to $2500

• So the claim would be the null hypothesis in this case.

• The alternative hypothesis would be that their losses are greater than $2500

Week 7 Examples

Week 7 Examples

• Remember that the null hypothesis always contains equality in that it will either have an = sign, a ≤ sign or a ≥ sign.

• The alternative hypothesis always has inequality in that it will either have a ≠ sign, a < sign or a > sign.

Week 7 Examples

Week 7 Examples

1 – 0.05 is 0.95

Week 7 Examples

Week 7 Examples

Week 7 Examples

• Why is the z = -2.05?

• Let me show you.

Week 7 Examples

Week 7 Examples

z = (575-500)/ (65/sqroot(45)) = 75/9.69 = 7.74

Week 7 Examples

7.74 is not in the range of the critical values +/- 2.33, thus we reject the H0

Week 7 Examples

Use “NORMSDIST” function in Excel “=NORMSDIST(-0.8767)” to get 0.190325 or 0.19 rounded to two decimal places. Since it is “two-tailed” (because the Ho has an Equal sign, I must multiply this number by two to get 0.38

Week 7 Examples

With an alpha of 0.05 and looking at the probability of 0.38, we conclude there is notenough evidence to reject the claim.

Week 7 Examples

Week 7 Examples

1 - 0.01 = 0.99

MY ANSWER

Week 7 Examples

Also remember this was “right-tailed”because Ho was p is less than or equalto 0.50

Week 7 Examples

P hat or a “p” with a little rooftop on it in this case is 7 over 100since 7 out of 100 had to pay out. p is 5% or 0.05, and n is mynumber of samples or 100.

Week 7 Examples

This would be (.07 -.05)/ sqroot of ((.05(1-.05))/100) or.02/sqroot of (.000475) which is.02/.02179 which is 0.92 rounded to two decimal places.

Week 7 Examples

Note the “may” when you can not rejectHo, you still can’t be definitive.

Week 7 Examples

Week 7 Examples

Use “NORMSDIST” function in Excel “=NORMSDIST(1.9596)” to get 0.975 rounded. NOWWE NEED TO SAY 1- THIS NUMBER or 1- 0.975 to get .025 and compare it to our alpha of.05. Since it is less than alpha it supports H1 and thus strongly supports the “claim”.