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Simple Linear Regression for the Crooked Arrow Bank

The president of Crooked Arrow National Bank wants to determine whether more than 60% of the banks loans are made to persons residing in Crooked Arrow. A random sample of 500 loans is selected with 320 being made to persons residing in Crooked Arrow.

a. Does the sample data provide evidence to conclude the more than 60% of the banks loans are made to persons residing in Crooked Arrow (using alpha=0.01)

1. Formulate the null and alternative hypotheses.
2. Determine the criterion for rejection or non-rejection of the null hypothesis.
3. Calculate the test statistic.
4. Compare the test statistic to the rejection region and make a judgment about the null and alternative hypotheses.
5. Interpret the statistical decision in terms of the problem.
6. Compute the observed "p" value in the hypothesis test and interpret this value. What does it mean?

Solution Summary

This solution shows step-by-step calculations to conduct a simple linear regression on bank loans. A null and alternative hypothesis is produced, test statistic is calculated and compared to the p-value, and the null hypothesis is accepted or rejected.

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