Hi, I've never done this before so I could use some help. Do I use a t-test here???
Here is the problem:
An insurance company is reviewing its current policy rates. When originally setting the rates they believed that the average claim amount was $1,800. They are concerned that the true mean is actually higher than this because they could potentially lose a lot of money. They randomly select 40 claims and calculate a sample mean of $1,950. Assuming that the std dev of claims is $500, and set α=: .05, test to see if the insurance co. should be concerned.
I have H0: μ ≤ 1800 , H1: μ > 1800
for the t-test I have t = (- μ ) / (s/√n)) = (1950 - 1800) / (500/(√40)) = 1.90
Am I on the right track?? If so what now??