Question

3. A property and casualty insurance company (which provides fire coverage for dwellings) felt that the mean distance from a home to the nearest fire department in rural Alabama was at least 10 miles. It set its fire insurance rates accordingly. Members of the community set out to show that the mean distance was less than 10 miles due to the increased number of volunteer fire departments. This, they felt, would convince the insurance company to lower its rates. They randomly identify 64 homes and measure the distance to the nearest fire department for each. The resulting sample mean was 8.7 miles. If σ = 5 miles, does the sample show sufficient evidence to support the community’s claim? Use the four step process for Hypothesis Testing. (8 points)

Step 1 – State Hypothesis in context of the problem.

Step 2 – Gather data, check assumptions, and find rejection region using α.

Step 3 – Calculate the appropriate test statistic and p-value.

Step 4 – State conclusion in context of the problem.

Step 1

Step 2

Step 3

Step 4

Answer 1