Question

A car insurance company advertises that customers switching to their insurance save, on average, £432 on their yearly premiums. A market researcher at a competing insurance discounter is interested in showing that this value is an overestimate so he can provide evidence to government regulators that the company is falsely advertising their prices. He randomly samples 82 customers who recently switched to this insurance and finds an average savings of £395, with a standard deviation of £102.

1. (a) What are the assumptions for conducting a hypothesis test and are these satisfied?

2. (b) What is your null hypothesis?

3. (c) What is your alternative hypothesis?

4. (d) Calculate the p-value for the hypothesis you proposed in (b) & (c).

5. (e) What is your conclusion when conducting a 95% hypothesis test?

6. (f) Do you agree with the market researcher that the amount of savings advertised is an overestimate? State your reasoning.

Answer 1