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CJ's Discount Appliance problem

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CJ's Discount Appliance Store issues its own credit cards. The credit manager wants to know if the mean monthly, unpaid balance is more than $400. The level of significance is .05. A random check of 200 unpaid balances revealed the sample mean of $420 and the standard deviation of the sample is $40. Should the credit manager conclude the population mean is greater than $400, or is it reasonable that the difference of $20 is due to chance?

1. What test is most appropriate for this problem?
A. Chi-square
B. ANOVA-single factor
C. T-test of paired samples
D. T-test assuming unequal variances
E. Z-test two-sample for means

2. What is the null hypothesis?
A. H0: μ = 400
B. H0: μ ≠ 400
C. H0: μ ≥ 400
D. H0: μ ≤ 400
E. H0: μ1 = μ2

3. What is the test value?
A. -7.07
B. 7.07
C. 1.65
D. -1.65
E. Something else

4. What is your decision?
A. Accept the null of no difference and conclude the balance is not statistically greater than $400.
B. Accept the null of no difference and conclude the balance is statistically less than $400.
C. Reject the null of no difference and conclude the balance is not statistically less than $400.
D. Reject the null of no difference and conclude the balance is statistically greater than $400.
E. Something else

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Education
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  • MSc, Meerut University
  • MPhil, Institute of Advanced Studies
  • MSc, AIT
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