We are interested in studying whether education level affects people's credit default risk (failing to pay...

We are interested in studying whether education level affects people's credit default risk (failing to pay their credit debt). A random study was conducted to see the percent of those who default on their credit card was conducted.

Highest level of education attained % defaulted Number of people studied

High School 36% 100

Some College 20% 160

Bachelor's degree 15% 180

Advanced degree 6% 50

Test the null hypothesis of whether the population proportions of credit default rate is the same for all levels of education.

Provide the test statistic value from your analysis and P-value

Solutions

Expert Solution

Conduct chi-squre test using Excel:

H₀: p₁ = p₂ = p₃ = p₄, Population proportions of credit default rate is the same for all levels of education

H₁: At least one p_i is different, Population proportions of credit default rate is not the same for all levels of education

Test statistic = 2.73

Degrees of freedom: df = k-1 = 4-1 = 3

Level of significance = 0.05

p-value (Using Excel function CHISQ.DIST.RT(test statistic,df)) = CHISQ.DIST.RT(2.73,3) = 0.435

Since p-value is greater than 0.05, we do not reject he null hypothesis and conclude that p₁ = p₂ = p₃ = p₄. Population proportions of credit default rate is the same for all levels of education.

orchestra answered 1 year ago

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