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In: Statistics and Probability

A Fair Isaac Corporation (FICO) score is used by credit agencies (such as mortgage companies and...

A Fair Isaac Corporation (FICO) score is used by credit agencies (such as mortgage companies and banks) to assess the creditworthiness of individuals. Values range from 300 to 850, with a FICO score over 700 considered to be a quality credit risk. According to Fair Isaac Corporation, the mean FICO score is 703.5. A credit analyst wondered whether high-income individuals (incomes in excess of $100,000 per year) had higher credit scores. He obtained a random sample of 40 high-income individuals and found the sample mean credit score to be 714.2 with a standard deviation of 83.2. Conduct a Classical Approach hypothesis test to determine if high-income individuals have higher FICO scores at the alpha=0.05 level of significance.

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