Question

Please help me understand how to do this problem.

The bad debt ratio for a financial institution is defined to be the dollar value of loans defaulted divided by the total dollar value of all loans made. suppose that a random sample of seven texas banks is selected and that the bad debt ratios (written as percentages) for these banks are 7% 4% 6% 7% 5% 4% and 9%

1. banking officials claim that the mean bad debt ratio for all southern banks is 3.5 percent and that the mean bad debt ratio for texas bank is higher.

A). set up the null and alternative hypothesis needed to attempt to provide evidence supporting the claim that the mean bad debt ratio for texas banks exceeds 3.5 percent.

B.) Discuss the meanings of Type 1 error and a Type II error in this situation

2. Assuming that bad debt ratios for texas banks are approximately normally distributed:

A) use a critical value and the given sample information to test the hypothesis you set up in party 1 by setting x equal to =0.01

B.) Interpret the value of 0.006 for the test

3. How might practical importance be defined for this situation.

Answer 1

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