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Each member of a random sample of 20 business economists was asked to predict the rate of inflation for the coming year. Assume that the predictions for the whole population of business economists follow a normal distribution with standard deviation 2%. Find any pair of values such that the probability that the sample standard deviation lies between these values is 0.90.

User Linuskmr
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Explanation:

To find a pair of values for the sample standard deviation such that the probability it lies between them is 0.90, we need to use the chi-square distribution. The formula for the chi-square distribution with (n-1) degrees of freedom for the sample standard deviation, where 'n' is the sample size, is:

chi^2 = ((n-1) * s^2) / (sigma^2)

Where:

chi^2 is the chi-square statistic.

n is the sample size (20 in this case).

s is the sample standard deviation.

sigma is the population standard deviation (given as 2% or 0.02).

We want to find two values of s such that the probability that chi^2 falls between them is 0.90. This means we need to find the 5th and 95th percentiles of the chi-square distribution with 19 degrees of freedom because (20-1=19).

You can use a chi-square table or calculator to find these percentiles. For a chi-square distribution with 19 degrees of freedom, the 5th percentile is approximately 9.235 and the 95th percentile is approximately 32.852.

Now, set up two equations using the chi-square formula:

For the 5th percentile:

9.235 = ((20-1) * s1^2) / (0.02^2)

For the 95th percentile:

32.852 = ((20-1) * s2^2) / (0.02^2)

Solve these equations for s1 and s2:

For s1:

s1^2 = (9.235 * (0.02^2)) / (20-1)

s1 ≈ 0.01356

For s2:

s2^2 = (32.852 * (0.02^2)) / (20-1)

s2 ≈ 0.02541

So, any pair of values such that the probability the sample standard deviation lies between them is 0.90 is approximately s1 ≈ 0.01356 and s2 ≈ 0.02541.

User Andrew LaPrise
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