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Math Help - Testing Hypothoses, P-Value method

  1. #1
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    Testing Hypothoses, P-Value method

    hey there guys, this question (and topic) is throwing me through a loop.

    Heres the question:
    When consumers apply for credit, their credit is rated using FICO scores. A Random sample of credit ratings is obtained, and, the fico scores are summarized w/ these stats: n = 18, x(bar)=660, s =95.9.

    Use a .05 significance lvl to test the claim that these credit ratings are from a population with a mean that is equal to 700. If the bank of newport requires a credit rating of 700 or higher for a car loan, do the results indicate that everyone will be eligible for a car loan, why or why not?


    So, tbh im not entirely sure what im doing here.

    I wrote the problem in the following way
    (660-700)/(95.9/(18)^(1/2)) = -1.76961
    The degrees of freedom are n-1 (17)
    I assume its a two tailed test, and I have the area in two tails 2.567
    I take the significance level and divide it by two and get .025

    and I have no idea where to go after that. Any help is appreciated
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  2. #2
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    Most of your work looks good.

    Quote Originally Posted by NecroWinter View Post

    I assume its a two tailed test, and I have the area in two tails 2.567
    I take the significance level and divide it by two and get .025
    It is a two tailed test, but what do you mean by 'the area in 2-tails'? The total area under the curve for the student's t-distribution is 1. Do you mean 2.567 is the critical value?
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  3. #3
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    Since its two tailed, it covers the right extreme, and left one (This probably isnt the best way to explain it)
    I have a chart with the degrees of freedom and the corresponding area.

    it looks like this
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  4. #4
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    Those are the critical values for the test statistic, we'll call it t(crit), so you need to compare that to what you have calculated (x_bar - mu)/(s/sqrt(n)), we'll call that t(calc).

    Now if |t(calc)|> |t(crit)| reject H_0.
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