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Hypothesis Testing and Confidence Intervals

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Your manager has speculated the following:
a. the average (mean) annual income was less than $50,000,
b. the true population proportion of customers who live in an urban area exceeds 40%,
c. the average (mean) number of years lived in the current home is less than 13 years,
d. the average (mean) credit balance for suburban customers is more than $4300.

1. Using the sample data, perform the hypothesis test for each of the above situations in order to see if there is evidence to support your manager's belief in each case a.-d. In each case use the 5 step hypothesis testing process with alpha = 0.05, and explain your conclusion in simple terms. Also be sure to compute the p-value and interpret.

2. Follow this up with computing 95% confidence intervals for each of the variables described in a.-d., and again interpreting these intervals.

3. Write a report to your manager about the results, distilling down the results in a way that would be understandable to someone who does not know statistics. Clear explanations and interpretations are critical.

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This solution is comprised of detailed explanation and step-by-step calculation of the given problems. Calculations have been shown both in text and MINITAB for better understanding. The solution provides students with a clear perspective of the underlying concepts.

Solution provided by:
Anwesha Ghosh, MSc
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  • MSc, Osmania University
  • MSc, Indian Institute of Technology - Roorkee (I.I.T.-ROORKEE)
  • BSc, Banaras Hindu University
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