Question

It is commonly believed that Wall Street security managers earn an average of $100,000 in bonus each year. At the 5% significance level, test the claim that Wall Street security managers do not earn an average of $100,000 in bonus each year.

Twenty managers were surveyed to ask how much bonus they earned this year. To maintain anonymity, only the P-value from the survey is known: the P-value is 0.034.

(1) Is this a two-tailed, left-tailed, or right-tailed test?

(2) State the conclusion of the hypothesis test.

(3) State the reason for your conclusion.

.

Answer 1

Given:

It is commonly believed that Wall Street security managers earn an average of $100,000 in bonus each year.

1)Hypothesis test:

The null and alternative hypothesis is

H0 : = 100000

Ha : 100000

This is a two talied test (Since Ha contain sign)

2) The conclusion of the hypothesis test:

P-value = 0.034

Significance level, = 0.05

Since P-value is less than significance level 0.05, we reject null hypothesis, H0

Conclusion: Reject H0. There is enough evidence to conclude that the wall street security managers do not earn an average of 100,000 in bonus each year.

3)The reason for the conclusion:

p-value =0.034 , α =0.05

Since p-value is less than significance level 0.05, we reject H0.