An insurance company is reviewing its current policy rates. When originally setting the rates they believed...

 

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An insurance company is reviewing its current policy rates. When originally setting the rates they believed that the average daim amount was $1,800. They are concerned that the true mean is actually higher than this, because they could potentially ose a lot of money. They randomly select 40 claims, and calculate a sample mean of $1,950. Assuming that the standard deviation of all claims is $500, and set a -.05, test to see if the insurance company should be concerned. Traditional Method rirst: Claim: u > $1800, so Ho: u = 1800 & H: u > 1800 Info: n=40, T-1950 * = 0.05 Critical z-value: 1.645 o = 500 Z =1.645 -u 1950 -1800 Test Statistic: : -1.90, the test 500 V40 In statistic falls in the critical region so we reject Ho- P-Value Method: STAT Press 1 Input: Stats u> 1800 Ho: 1800 z = 1.897366596 (test stat) p=0.0288897188 O: 500 T:1950 I:1950 n= 40 n: 40 u: > u. Calculate Since p<a, we reject Ho. Conclusion: The sample data support the claim that the average claim is higher than $1800. An insurance company is reviewing its current policy rates. When originally setting the rates they believed that the average daim amount was $1,800. They are concerned that the true mean is actually higher than this, because they could potentially ose a lot of money. They randomly select 40 claims, and calculate a sample mean of $1,950. Assuming that the standard deviation of all claims is $500, and set a -.05, test to see if the insurance company should be concerned. Traditional Method rirst: Claim: u > $1800, so Ho: u = 1800 & H: u > 1800 Info: n=40, T-1950 * = 0.05 Critical z-value: 1.645 o = 500 Z =1.645 -u 1950 -1800 Test Statistic: : -1.90, the test 500 V40 In statistic falls in the critical region so we reject Ho- P-Value Method: STAT Press 1 Input: Stats u> 1800 Ho: 1800 z = 1.897366596 (test stat) p=0.0288897188 O: 500 T:1950 I:1950 n= 40 n: 40 u: > u. Calculate Since p<a, we reject Ho. Conclusion: The sample data support the claim that the average claim is higher than $1800.

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Required solution Answer Since the population standard deviation is known here we will use z tabl... View the full answer