Question

According to the credit rating agency Equifax, credit limits on newly issued credit cards increased between January 2011 and May 2011. Suppose that random samples of 400 new credit cards issued in January 2011 and 500 new credit cards issued in May 2011 had average credit limits of $2635 and $2887, respectively. Suppose that the sample standard deviation for these two samples were $365 and $412 respectively. Assume that the population standard deviations for the two populations are unknown and unequal. a) Let ?1 and ?2 be the average credit limits on all credit cards issued in January 2011 and in May 2011, respectively. Construct a 98% confidence interval for ?1 −?2. b) At a 1% significance level, can you conclude that the average credit limit for all new credit cards issued in January 2011 was lower than the corresponding average for all credit cards issued in May 2011? Use both the P-value approach and the critical value approach to make this test.

Answer 1

b)

Hence we have evidence that average credit limit for all new credit cards issued in January 2011 was lower than the corresponding average for all credit cards issued in May 2011