Credit scorecards are used by financial institutions to help decide to whom loans should be granted. An analyst of the records of the random sample of loans at one bank produced the following results:

 

 

Score below 600

Sample Size

562

Number Defaulted

12

 

Score 600 or more

Sample size

804

Number defaulted

7

 

 

The analyst is interested in knowing whether those who score below 600 are more likely to default than those who score 600 or more. Based on this scenario:

 

1. What is the null hypothesis, in symbols? 

 

2. What is the null hypothesis, in words? 

 

3. What is the alternative hypothesis, in symbols? 

 

4. What is the alternative hypothesis, in words? 

 

5. What is the name of the appropriate statistical test? 

 

6. (3 points) What is the value of the appropriate statistical test? 

 

7. Against what critical value do you compare the appropriate statistical test value (α = 0.05)? 

 

8. Based on these data, do you accept HA? (N/Y) 

, Why/why not? 

 

9. What conclusion (understandable to a layman) do you conclude about the question of interest? 

AccountingQueen

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Status NEW Posted 20 Aug 2017 07:08 AM My Price 8.00

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