A manager of the credit department for an oil company would like to determine whether the mean monthly balance of credit card holders is equal to $75. An auditor selects a random sample of 100 accounts and finds that the mean owed is $83.40 with a sample standard deviation of $23.65. If you were to conduct a test to determine whether the auditor should conclude that there is evidence that the mean balance is different from $75, which test would you use? a) Z-test of a population mean b) Z-test of a population proportion c) t-test of population mean d) t-test of a population proportion
Question
Answer:
c) t-test of population mean
Explanation:
The t-test statistic is used in hypothesis testing. Here we would use a one sample t test to test our hypothesis. The one sample t test measures the statistical difference between the hypothesized mean and the sample mean. In a one sample t test or single sample t test, a test variable is measured against a test value.
Example we compare our test variable to the hypothesized mean value $75 above.
The t test is used instead of z score when standard deviation is unknown.
Using the t test, we either accept or reject the null hypothesis given alternative hypothesis.