Ophelia O'Brien, VP of Consumer Credit of Credit First Banks (CFB), monitors the default rate on personal loans at the CFB member banks.One of her standards is "no more than 5% of personal loans should be in default." On each Friday, the default rate is calculated for a sample of 500 personal loans.Last Friday's sample contained 30 defaulted loans.Ophelia's null hypothesis is ___.
A)p 0.05
B)p ≤ 0.05
C)n = 30
D)n = 500
E)n = 0.05

Question

Ophelia O'Brien, VP of Consumer Credit of Credit First Banks (CFB), monitors the default rate on personal loans at the CFB member banks.One of her standards is "no more than 5% of personal loans should be in default." On each Friday, the default rate is calculated for a sample of 500 personal loans.Last Friday's sample contained 30 defaulted loans.Ophelia's null hypothesis is ___.
A)p > 0.05
B)p ≤ 0.05
C)n = 30
D)n = 500
E)n = 0.05

Quizplus · Accepted Answer

The null hypothesis represents the status quo or the standard that is being tested. In this case, Ophelia's standard is that no more than 5% of personal loans should be in default, which translates to the null hypothesis p ≤ 0.05.