A rent-to-own (RTO) agreement appeals to low-income and financially distressed consumers. It allows immediate access to merchandise, and by making all payments, the consumer acquires the merchandise. At the same time, goods can be returned at any point without penalty. Suppose a recent study documents that 65% of RTO contracts are returned, 30% are purchased, and the remaining 5% default. In order to test the validity of this study, an RTO researcher looks at the transaction data of 420 RTO contracts, of which 283 are returned, 109 are purchased, and the rest defaulted. (You may find it useful to reference the appropriate table: chi- square table or Ftable) a. Choose the appropriate alternative hypothesis to test whether the return, purchase, and default probabilities of RTO contracts differ from 0.65, 0.30, and 0.05, respectively. O At least one of the p; (i= 1, 2, 3) differs from its hypothesized value. O All pi (i= 1, 2, 3) values differ from its hypothesized value. b. Compute the value of the test statistic. (Round the intermediate calculations to at least 4 decimal places and final answer to 3 decimal places.) Test statistic c-1. Find the p-value. O p-value < 0.01 O 0.01 sp-value < 0.025 O 0.025 sp-value < 0.05 O 0.05 s p-value < 0.10 Opvalue > 0.10

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c-2. At the 5% significance level, interpret the test results.
H0. Therefore, we
claim that the proportions of return, purchase, and
default are different from 0.65, 0.30, and 0.05, respectively.
Transcribed Image Text:c-2. At the 5% significance level, interpret the test results. H0. Therefore, we claim that the proportions of return, purchase, and default are different from 0.65, 0.30, and 0.05, respectively.
A rent-to-own (RTO) agreement appeals to low-income and financially distressed consumers. It allows immediate access to
merchandise, and by making all payments, the consumer acquires the merchandise. At the same time, goods can be returned at any
point without penalty. Suppose a recent study documents that 65% of RTO contracts are returned, 30% are purchased, and the
remaining 5% default. In order to test the validity of this study, an RTO researcher looks at the transaction data of 420 RTO contracts,
of which 283 are returned, 109 are purchased, and the rest defaulted. (You may find it useful to reference the appropriate table: chi-
square table or Ftable)
a. Choose the appropriate alternative hypothesis to test whether the return, purchase, and default probabilities of RTO contracts differ
from 0.65, 0.30, and 0.05, respectively.
At least one of the pi (i= 1, 2, 3) differs from its hypothesized value.
O All pi (i= 1, 2, 3) values differ from its hypothesized value.
b. Compute the value of the test statistic. (Round the intermediate calculations to at least 4 decimal places and final answer to 3
decimal places.)
Test statistic
c-1. Find the p-value.
O p-value < 0.01
0.01 s p-value < 0.025
0.025 sp-value < 0.05
0.05 s p-value < 0.10
p-value > 0.1O
Transcribed Image Text:A rent-to-own (RTO) agreement appeals to low-income and financially distressed consumers. It allows immediate access to merchandise, and by making all payments, the consumer acquires the merchandise. At the same time, goods can be returned at any point without penalty. Suppose a recent study documents that 65% of RTO contracts are returned, 30% are purchased, and the remaining 5% default. In order to test the validity of this study, an RTO researcher looks at the transaction data of 420 RTO contracts, of which 283 are returned, 109 are purchased, and the rest defaulted. (You may find it useful to reference the appropriate table: chi- square table or Ftable) a. Choose the appropriate alternative hypothesis to test whether the return, purchase, and default probabilities of RTO contracts differ from 0.65, 0.30, and 0.05, respectively. At least one of the pi (i= 1, 2, 3) differs from its hypothesized value. O All pi (i= 1, 2, 3) values differ from its hypothesized value. b. Compute the value of the test statistic. (Round the intermediate calculations to at least 4 decimal places and final answer to 3 decimal places.) Test statistic c-1. Find the p-value. O p-value < 0.01 0.01 s p-value < 0.025 0.025 sp-value < 0.05 0.05 s p-value < 0.10 p-value > 0.1O
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