Ophelia O'Brien,VP of Consumer Credit of American First Banks (AFB),monitors the default rate on personal loans at the AFB 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 38 defaulted loans. Using $\alpha$ = 0.10,the appropriate decision is _______.
A) reduce the sample size
B) increase the sample size
C) reject the null hypothesis
D) fail to reject the null hypothesis
E) do nothing

Question

Quizplus · Accepted Answer

The null hypothesis is that the default rate is 5% or less. With 38 defaults out of 500 loans, the sample default rate is 7.6%, which is significantly higher than 5%. At a significance level of 0.10, this provides enough evidence to reject the null hypothesis.

Ophelia O'Brien,VP of Consumer Credit of American First Banks (AFB),monitors α\alphaα

Ophelia O'Brien,VP of Consumer Credit of American First Banks (AFB),monitors $\alpha$