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    Null and alternative hypotheses for an insurance problem

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    The records of a casualty insurance company show that, in the past, its clients have had a mean of 1.9 auto accidents per day with a standard deviation of 0.04.

    The actuaries of the company claim that the standard deviation of the number of accidents per day is no longer equal to 0.04. Suppose that we want to carry out a hypothesis test to see if there is support for the actuaries' claim.

    State the null hypothesis Ho and alternative hypothesis H1 that would use this test.

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    Solution Preview

    Here, the null hypothesis is basically restating what is already known - that the standard deviation if 0.04.

    The goal of hypothesis testing is to see if there is a difference ...

    Solution Summary

    This solution states the null and alternative hypotheses and explains how they were determined.