A study by the Massachusetts Community & Banking Council found that many minorit

Question

A study by the Massachusetts Community & Banking Council found that many minority groups are unable to borrow money at the same interest rates as whites (Boston Globe, Feb 28, 2008). The data in the contingency table below was what was used for the study, and the researchers assumed a level of significance of .01.

Race High interest rate Low interest rate

Black 553 480

Latino 265 324

White 491 3701

a. Write the null and alternative hypotheses for this test.   Define your notation.

b. __________What type of hypothesis test will you perform?

A. t-test for the mean (one-sample)

B. Z-test for the proportion (one-sample)

C. t-test for the difference between two means, independent samples, either equal variance (pooled) or unequal variance

D. Paired t-test for the mean difference (related samples)

E. Two-sample z-test for the difference in proportions.

F. Chi-square test for goodness of fit (one group)

G. Chi-square test for either independence or homogeneity (two or more groups)

c. State the critical value(s) for this test to at least two decimal places.

d. The test statistic for this test is 1020.67. What do you conclude, in the context of this question, and why?

Explanation / Answer

null hypothesis: race and interest rates are not associated

alternate hypothesis: race and interest rates are associated

G. Chi-square test for either independence or homogeneity (two or more groups)

c)critical values for 2 degree of freedom and 0.01 level =9.2103

d) as test stat is very much high then critical value we reject null hypothesis and conclude that race and interest rates are dependent.

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