Answer to Question #348560 in Statistics and Probability for Kheti

Question

A bank manager wants to know the mean amount of mortgage paid per month by

homeowners in an area. A random sample of 120 homeowners selected from this area

showed that they pay an average of R6500 per month for their mortgages. The

population standard deviation of such mortgages is R1500.

i. Identify the point estimate for the average monthly mortgage amount. [1]

ii. Explain the significance of a confidence interval in this regard – in other words, why

is it not correct (not recommended) to say that the average amount of mortgage paid by all homeowners is R6500?

What is the appropriate distribution to use? Explain. [2]

Find a 99% confidence interval for the mean amount of mortgage paid per month by all homeowners in this area. Interpret the results. [5]

What effect would a change from a 99% to a 90% confidence level have on the interval width for the average mortgage amount? Explain. [3]

Answer 1

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