Question

While starting salaries have fallen for college graduates in many of the top hiring fields, there is some good news for business undergraduates with concentrations in accounting and finance (Bloomberg Businessweek, July 1, 2010). According to the National Association of Colleges and Employers’ Summer 2010 Salary Survey, accounting graduates commanded the second highest salary at $50,402, followed by finance graduates at $49,703. Let the standard deviation for accounting and finance graduates be $6,000 and $10,000, respectively.

a. What is the probability that 100 randomly selected accounting graduates will average more than $52,000 in salary?

b. What is the probability that 100 randomly selected finance graduates will average more than $52,000 in salary?

c. Comment on the above probabilities.

Answer 1

Explanation:

According to the central limit theorem, if independent random samples of size n are repeatedly taken from any population and n is large, the distribution of the sample means will approach a normal distribution. The size of n should be greater than or equal to 30. Given n = 100 for both scenarios, we would apply the formula,

z = (x - µ)/(σ/√n)

a) x is a random variable representing the salaries of accounting graduates. We want to determine P( x > 52000)

From the information given

µ = 50402

σ = 6000

z = (52000 - 50402)/(6000/√100) = 2.66

Looking at the normal distribution table, the probability corresponding to the z score is 0.9961

b) x is a random variable representing the salaries of finance graduates. We want to determine P(x > 52000)

From the information given

µ = 49703

σ = 10000

z = (52000 - 49703)/(10000/√100) = 2.3

Looking at the normal distribution table, the probability corresponding to the z score is 0.9893

c) The probabilities of either jobs paying that amount is high and very close.