SOLUTION: Suppose that an insurance agent claims that less than 5% of his life insurance policies ever have to pay out. You decide to test his claim at the a=0.01 significance level. A sampl

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Question 461577: Suppose that an insurance agent claims that less than 5% of his life insurance policies ever have to pay out. You decide to test his claim at the a=0.01 significance level. A sample of a 100 policies from last year finds that 7 out of them had to pay out. With a critical value of -2.33, compute the sample statistic. nora1.skelton@yahoo.com
Answer by edjones(8007) About Me  (Show Source):
You can put this solution on YOUR website!
H[o]:<.05
p[o]=.05, q[o]=.95, n=100
(P-p[o])/sqrt((p[o]*q[o])/n)
=(.07-.05)/sqrt((.05*.95)/100)
=.02/.022
=0.91 the sample statistic.
Since alpha for a 0.01 significance level is greater than 2.33 and the sample statistic is 0.91 then the null hypothesis in not is not rejected.
.
Ed