Question

# 1. Based on information from a large insurance company, 67% of all damage liability claims are...

1. Based on information from a large insurance company, 67% of all damage liability claims are made by single people under the age of 25. A random sample of 54 claims showed that 44 were made by single people under the age of 25. Does this indicate that the insurance claims of single people under the age of 25 is higher than the national percent reported by the large insurance company? Give the test statistic and your conclusion.

a) z = 2.263; fail to reject Ho at the 5% significance level

b) z = -2.263; reject Ho at the 5% significance level

c) z = -1.763; fail to reject Ho at the 5% significance level

d) z = 2.263; reject Ho at the 5% significance level

e) z = 1.763; reject Ho at the 5% significance level

2. An auditor for a hardware store chain wished to compare the efficiency of two different auditing techniques. To do this he selected a sample of nine store accounts and applied auditing techniques A and B to each of the nine accounts selected. The number of errors found in each of techniques A and B is listed in the table below:

 Errors in A Errors in B 27 13 30 19 28 21 30 19 34 36 32 27 31 31 22 23 27 32

Does the data provide sufficient evidence to conclude that the number of errors in auditing technique A is fewer than the number of errors in auditing technique B at the 0.01 level of significance? Select the [Rejection Region, Decision of Reject (RH0) or Failure to Reject (FRH0)]. (Hint: the samples are dependent)

a) [z < -2.9 and -z < -2.9, FRH0]

b) [t < -2.9, FRH0]

c) [-t < 2.9 and t < 2.9, RH0]

d) [t > 2.9, FRH0]

e) [t < -2.9 or -t < -2.9, RH0]

f) None of the above

Solution: 1. Based on information from a large insurance company, 67% of all damage liability claims are made by single people under the age of 25. A random sample of 54 claims showed that 44 were made by single people under the age of 25. Does this indicate that the insurance claims of single people under the age of 25 is higher than the national percent reported by the large insurance company? Give the test statistic and your conclusion.

Answer: d) z = 2.263; reject Ho at the 5% significance level

2. Does the data provide sufficient evidence to conclude that the number of errors in auditing technique A is fewer than the number of errors in auditing technique B at the 0.01 level of significance? Select the [Rejection Region, Decision of Reject (RH0) or Failure to Reject (FRH0)]. (Hint: the samples are dependent)

Answer: f) None of the above

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