Question

A bond analyst is analyzing the interest rates for equivalent municipal bonds issued by two different states. At α = 0.05, we wish to test whether there is enough evidence to conclude that there is a difference in the interest rates paid by the two states. What is the value of the test statistic? State A State B Sample size 80 50 Mean interest rate (%) 4.0 4.5 Population variance 0.04 0.03

Answer 1

Answer: 15.08

Explanation:

The test statistic for difference between two population means is given by :-

`z=\frac{\overline{X}-\overline{Y}}{\sqrt{(\sigma_x^2)/(n_x)+(\sigma_y^2)/(n_y)}}`

Given : State A State B

Sample size 80 50

Mean interest rate (%) 4.0 4.5

Population variance 0.04 0.03

Then , the test statistic for difference between two population means will be :-

`z=\frac{4.0-4.5}{\sqrt{(0.04)/(80)+(0.03)/(50)}}\\\\\Rightarrow z=15.0755672289\approx15.08`

Hence, the value of the test statistic will be 15.08 .