Good credit: The Fair Isaac Corporation (FICO) credit score is used by banks and other lenders to determine whether someone is a good credit risk. Scores range from 300 to 850 , with a score of 720 or more indicating that a person is a very good credit risk. An economist wants to determine whether the mean FICO score is more than the cutoff of 720. She finds that a random sample of 75 people had a mean FICO score of 725 with a standard deviation of 95 . Can the economist conclude that the mean FICO score is greater than 720 ? Use the =α0.01 level of significance and the P-value State the appropriate null and alternate hypotheses. H0 : H1 : This hypothesis test is a ▼(blank
Continuous Probability Distributions
Probability distributions are of two types, which are continuous probability distributions and discrete probability distributions. A continuous probability distribution contains an infinite number of values. For example, if time is infinite: you could count from 0 to a trillion seconds, billion seconds, so on indefinitely. A discrete probability distribution consists of only a countable set of possible values.
Normal Distribution
Suppose we had to design a bathroom weighing scale, how would we decide what should be the range of the weighing machine? Would we take the highest recorded human weight in history and use that as the upper limit for our weighing scale? This may not be a great idea as the sensitivity of the scale would get reduced if the range is too large. At the same time, if we keep the upper limit too low, it may not be usable for a large percentage of the population!
Good credit: The Fair Isaac Corporation (FICO) credit score is used by banks and other lenders to determine whether someone is a good credit risk. Scores
to
, with a score of
or more indicating that a person is a very good credit risk. An economist wants to determine whether the mean FICO score is more than the cutoff of
She finds that a random sample of
people had a mean FICO score of
with a standard deviation of
. Can the economist conclude that the mean FICO score is greater than
? Use the
level of significance and the
|
H0
H1
|
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