Question

An insurance company is reviewing its current policy rates. When originally setting the rates they believed that the average claim amount was $2200. They are concerned that the true mean is actually higher than this, because they could potentially lose a lot of money. They randomly select 64 claims, and calculate a sample mean of $5800. Assuming that the standard deviation of claims is $720, and α = .05, use a two-tail test to see if the insurance company should be concerned.

1. State the Independent and Dependent Variables
   1. State the Null Hypothesis in words and symbols.
   2. State the alternative Hypothesis in words and symbols.
2. Compute the appropriate statistic.
3. What is the decision (Retain or Reject)
4. State the full conclusion in words

Effect

Direction

Size of Effect. (Cohen’s d) mean difference/standard deviation

Answer 1