Question

A loan officer compares the interest rates for 48-month fixed-rate auto loans and 48-month variable-rate auto loans. Two independent, random samples of auto loan rates are selected. A sample of five 48-month variable-rate auto loans had the following loan rates:

2.10%

3.09%

2.873%

3.22%

3.11%

while a sample of five 48-month fixed-rate auto loans had loan rates as follows:

4.030%

3.95%

4.390%

3.84%

4.23%

Figure 11.7

JMP Output of Testing the Equality of Mean Loan Rates for Variable and Fixed 48-Month Auto Loans
Means and Std Deviations
Level	Number	Mean	Std Dev
Fixed	5	4.08800	0.453056
Variable	5	2.87860	0.220952
t Test
Variable-Fixed
Assuming equal variances
Difference	−1.2094	t Ratio	−5.36500
Std Err Dif	0.2254	DF	8
Upper CL Dif	−0.6896	Prob > |t|	0.0007*
Lower CL Dif	−1.7292	Prob > t	0.9997
Confidence	0.95	Prob < t	<0.0003*

(a) Set up the null and alternative hypotheses needed to determine whether the mean rates for 48-month variable-rate and fixed-rate auto loans differ.

	H0: µf – µv =    versus Ha: µf – µv ≠

Figure 11.7 gives the JMP output of using the equal variances procedure to test the hypotheses you set up in part a. Assuming that the normality and equal variances assumptions hold, use the JMP output and critical values to test these hypotheses by setting αequal to .10, .05, .01, and .001. How much evidence is there that the mean rates for 48-month fixed- and variable-rate auto loans differ? (Round your answer to 3 decimal places.)

t=______

(c) Figure 11.7 gives the p-value for testing the hypotheses you set up in part a. Use the p-value to test these hypotheses by setting α equal to .10, .05, .01, and .001. How much evidence is there that the mean rates for 48-month fixed- and variable-rate auto loans differ?(Round your answer to 4 decimal places.)

p-value=_______

(d) Calculate a 95 percent confidence interval for the difference between the mean rates for fixed- and variable-rate 48-month auto loans. Can we be 95 percent confident that the difference between these means exceeds .4 percent? (Round your answers to 4 decimal places.)

confidence interval= [ , ]

Answer 1