H-a Hypothesis Testing!

[Bobby24]

Hi All

Can you please help me with understanding Problem # 14 on Page 328 of Schweser Notes (Quant- Hypothesis Testing)

What is the trick for developing H-a in this question.

Would appreciate your responses.

Thanks
Bobby

 

[markmywords]

up late...

Since the question wants to test a "does" or "does not" = problem, use a two-tailed test.

The question involves a single population with known std dev, also the wording is a giveaway since it relates to the diff b/w population and sample variance, therefore a chi-2 test is appropriate.

Decision rules:
Ho is what the analyst wants to reject, so Ho: var=300^2 (variance).
Ha is the alt. hypothesis, or Ha: var doesn't =300^2.

Can't believe i still remember all this.

 

[Bobby24]

Hi

The only thing that is confusing me in this question is here in this sentence...

"A study was conducted to determine whether the std dev of mon maintainence costs of a Pepper III aircraft is $300".

The only thing I can figure out of this is that the analyst wants to determine if the cost = 300 dollars and for me its Ha and not Ho as per your understanding!!!

Looks like I am little mixed up with Ha and Ho... can you make it more clear to me.

Thanks
Bobby

 

[markmywords]

To be precise the analyst wants to see if the std dev of cost = $300 (not if the cost =300).

The wording in the question is "whether" the std dev is 300. Maybe this is where you got confused. "Whether" means if it "is" or "isn't". You wrote "the analyst wants to determine if the cost is 300", but a better wording would be "the analyst wants to determine if the std dev is or isn't 300". The "is" part will be Ho (or in a two-tailed test simply the one with the = sign).

Refer to pp.291-292, specifically the top of p.292. Ho is always the hypothesis being tested, Ha is basically the "default" hypothesis if Ho can be rejected.

Since the analyst's original test refers to std dev=300 this will be Ho. If this is rejected, that is, std dev doesn't =300, is Ha.

Hope this helps.

 

[Bobby24]

Thanks mark....
Now it is clear to me.