9. Suppose you believe that the variance in rent paid by New Yorkers living in a
ID: 3324972 • Letter: 9
Question
9. Suppose you believe that the variance in rent paid by New Yorkers living in a par ticular neighborhood is 8500,000. You take a random of two people living in that neighborhood. One pays S1,500/month, the other pays S3,500 per month. Suppose further that you are analyzing this data on a desert island with no internet, no R, and just a z-table (no 2 table). How could you use a z table to test the null hypothesis Ho : Var(rent paid in neighborhood) = $500,000 What would your p-value be approximately?Explanation / Answer
TS = (n-1)s^2/sigma^2
s^2 = 2000000
n = 2
TS = (2-1)* 2000000/500000
= 4
which is chi-square with df = 1 ,
we know chi-square = z^2
p-value = P(chi^2 > 4)
=P(|Z| > 2)
=0.0455
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