Answer:
An insurance company reports that 75% of its claims are settled within two months of being filed. In order to test that the percent is less than seventy-five, a state insurance commission randomly selects 35 claims and determines that 23 of the 35 were settled within two months.
a) Write out the hypotheses.
Fewer than 75% of claims settled within two months of filing.
b) Calculate the test statistic.
Test statistic = percent of claims settled in two months = 23/35 = 65.7%
c) Find the p-value.
we need to use the z-score with a table
=
standard deviation = s = \sqrt{\frac{1}{N-1} \sum_{i=1}^N (x_i - \overline{x})^2}, =
√(1/34) [(0.657)(12) + (0.343)(23)] = √0.463911765 = 0.681
let 1 = "solved" and 0 = "unresolved"
thus our mean is 0.657
z = (0.75 - 0.657)/(0.681) - 0.137
p = 0.55172
d) Do we reject the null hypothesis? Explain.
Yes, because our p value is not below 0.05 and is not substantial to prove our null hypothesis
e) What can you conclude based on this evidence?
That further testing is needed.