Question

A loan officer asks a random sample of loan applicants about their marital status and whether their loan application was approved. The table gives the counts of the respondents. Is there a relationship between marital status and loan approval? Use a = 0.05. Status Single Married Divorced Loan Approved? Yes No 200 175 380 230 340 275

Answer 1

solution Ho - There is no relationship between marital Status and loan approval Hi there is a relationship between marital Status and loan approval first find the expected values of each cell oi Ei 6i-ED/Ei a Test statistic (x²) = 45 2301-E3 Ei 200 215.62 113 = 19.64 175 159.38 1.53 Given x=0.05 380 350.75 2.44 230 259.25 3.3 critical value is 3uo 353.62 0.52 dif=(5-D ((-) =(3-D(2-D=2 275 261. 38 go writical value is 5.9911 0.7) Here cal x² = 9.64 > 5.991, so reject to There is a evidence that there is a relationship between marital status and loan approval - P-value = 0.0081