Question

The average credit card debt for a recent year was $8,776. Five years earlier the average credit card debt was $8,189. Assume sample sizes of 32 were used and the population standard deviations of both samples were $690. Is there evidence to cónclude that the average credit card debt has increased? Use a- 0.05
a. State the hypotheses
b. Find the critical value.
c. Compute the test statistic
d. Make the decision.
e. Summarize the results

Answer 1

Answer:

We reject H₀.  We support that the new average credit card debt is bigger than the previous average

Step-by-step explanation:

Five years earlier

μ   = 8189

σ  =  690

Sample size   n  = 32

Recent year debt

x  =  8776

Sample size   n  = 32

a) Hypothesis Test:

Null Hypothesis                        H₀            x  =  μ   = 8189

Alternative Hypothesis           Hₐ             x >  μ

b) z(c)  Alternative Hypothesis establishes that the test is a one tail-test to the right.

z(c)   for significance level  α = 0.05    is  from z-table      z(c) = 1,64

c) z(s)  =  (  x  -   μ ) / σ /√n

z(s)  =  ( 8776  - 8189 ) / 690 /√32

z(s)  =  587 *5,66/ 690

z(s) = 4,81

d) Comparing   z(c)    and z(s)

z(s)  >  z(c)   Then z(c) is in the rejection region and we reject H₀

e) We have evidence that at 95 % of confidence the new value for the debt in credit card is now bigger than the average