Hypothesis Testing for Claim of Average Life Insurance Premium
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Suppose that an insurance company claims that the average life insurance policy premium that he sells is $450 per year. A sample of 40 customers yields a mean of = $475 and a standard deviation of s = $85. You decide to test his claim at the
a = 0.05 significance level.
If the hypotheses are:
H0: μ = 450
H1: μ ± 450
With critical values of ± 1.96, compute the sample statistic, and choose the appropriate conclusion.
a. we cannot reject H0, thus the average premium may be $450
or,
b. we reject H0, thus the average premium is not $450
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Solution Summary
This solution shows how to test the given hypotheses regarding health insurance claims. The solution is provided in both Word and PDF format.
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