Information from the American Institute of Insurance indicated that for those in
ID: 3231620 • Letter: I
Question
Information from the American Institute of Insurance indicated that for those individuals over 40 years old that have life insurance, the mean amount of their life insurance is $11,000. The population standard deviation is $4,000. The concern by The American Institute of Insurance is that do people that have life insurance have an adequate amount to cover funeral expenses. If it is determined that at least 85% of individuals over 40 that have insurance have at least $10, 500, the American Institute of Insurance will be satisfied and not develop a promotional campaign emphasizing the importance of having an adequate amount of life insurance. For testing purposes, The American Institute of Insurance randomly selected a sample of 50 individuals over 40 that have life insurance. Will The American Institute of Insurance need to develop a promotional campaign promoting the importance of having an adequate amount of life insurance? (prove Statistically)Explanation / Answer
here null hypothesis: p>=0.85
alternate hypothesis: p<0.85
for n=50
std error =(p(1-p)/n)1/2 =0.0505
phat=40/50=0.8
hence test stat z=(phat-p)/std error =-0.9901
for above test stat p value =0.161
as p value is significantly high we can not reject null hypothesis and can not advice for promotional campaign