A mortgage broker is offering home mortgage at a rate of 9.5% but is fearful that this value is higher than many others are charging. A sample of 40 mortgages files in the country court house shows an average of 9.25% with a standard deviation of 8.61%. Does this sample indicate a smaller average? Use ó= 0.05 and assume a normally distributed population?

Question

A mortgage broker is offering home mortgage at a rate of 9.5% but is fearful that this value is higher than many others are charging.  A sample of 40 mortgages files in the country court house shows an average of 9.25% with a standard deviation of 8.61%. Does this sample indicate a smaller average? Use ó= 0.05 and assume a normally distributed population?

Laila · Answer

Yes, because the test statistic is greater than -1.645.