Question

When you apply for credit your FICO score is used to determine your credit worthiness and the interest rate you will be charged. Previous studies have shown that the FICO scores had a standard deviation of 7. A new firm has contacted your agency claiming that using their methods your clients can raise their FICO scores to above a 700 within 3 months. Your boss does a trial with the company. You don't believe the company and a take a sample from 25 of the clients who participated and find that their mean FICO score is 702. Test the company's claim at the .10 significance level. Be sure to show your claim and hypothesis. What do you conclude about your null? What do you conclude about the claim? Should you encourage your boss to pay for the service going forward? T T T T Paragraph 3 (12pt) T T T Arial www f Mashups HTHL CSS Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Ans alsT NOV 1 tv 21 MacBook Pro

Answer 1

H₀: $\mu$ = 700

H₁: $\mu$ > 700

The test statistic

α – μ σινη

  

702 – 700 7/25

  

-1.43

P-value = p(Z > 1.43)

           = 1 - P(Z < 1.43)

           = 1 - 0.9236

           = 0.0764

Since the P-value is less than the significance level(0.0764 < 0.10), so we should reject H₀.

At 0.10 significance level, there is sufficient evidence to support the claim that using the new firm's methos the clients can raise their their FICO scores to above a 700 within 3 months.