Question

In a study entitled “How Undergraduate Students Use Credit Cards”, it was reported that a sample of 1000 undergraduate students have a mean credit card balance of $3173. This figure was an all-time high and had increased 44% over the previous five years. Assume that a current study is being conducted to determine if it can be concluded that the mean credit card balance for undergraduate students has changed compared to the original report. Based on previous studies, use a population standard deviation of $1000.

a)   State the null and alternative hypotheses                       (5 points)

b)   What is the Type I error in this situation? What are the consequences of making this error? (5 points)

c)   The new study finds that in a sample of 100 students, the mean credit card balance was $3325. Compute the p-value of the test statistics testing whether there is a significant difference between the first and second study.                           (5 points)

d)   Using a 5% level of significance, can we reject the null hypothesis? Explain your answer and the rejection criteria used.                                    (5 points)

e)   Using a 1% level of significance, can we reject the null hypothesis? Explain your answer and the rejection criteria used.                                    (5 points)

Answer 1