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Chapter 7: Q14E (page 398)

Libor interest rate. The interest rate at which London banks lend money to one another is called the London interbank offered rate, or Libor. The British Bankers Association regularly surveys international banks for the Libor rate. One recent report (Bankrate.com, March 16, 2016) had the average Libor rate at 1.2% for 1-year loans—a value considered high by many Western banks. Set up the null and alternative hypotheses for testing the reported value.

Short Answer

Expert verified

H0: r = 0.012

Ha: r> 0.012

Step by step solution

01

Given the information

The London interbank offered rate (LIBOR) is given.

The British bankers association surveys the labor rate.

02

Formulate the hypothesis

The bankers want to make an inference about r.

A report had the average labor rate at 1.2%. i.e.,r > 0.012 represents the alternative hypothesis and r = 0.012 represents the null hypothesis.

That is, the banker desires the right-tailed test.

Therefore,

The null hypothesis is given by

H0: r = 0.012

An alternative hypothesis is given by

Ha: r > 0.012

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Most popular questions from this chapter

A simple random sample of 25 observations was selected from a normal population. The mean and standard deviation of this sample are 20 and 5, respectively.

a. Test H0:μ=22against Ha:μ≠22at the 10% significance level.

b. Test H0:μ≥22against H0:μ≤22at the 1% significance level.

Which of the elements of a test of hypothesis can and should be specified prior to analyzing the data that are to be used to conduct the test

Solder-joint inspections. Current technology uses high-resolution X-rays and lasers to inspect solder-joint defects on printed circuit boards (PCBs) (Global SMT & Packaging, April 2008). A particular manufacturer of laser-based inspection equipment claims that its product can inspect, on average, at least 10 solder joints per second when the joints are spaced .1 inch apart. The equipment was tested by a potential buyer on 48 different PCBs. In each case, the equipment was operated for exactly 1 second. The number of solder joints inspected on each run follows:

The potential buyer wants to know whether the sample data refute the manufacturer’s claim. Specify the null and alternative hypotheses that the buyer should test.

Which element of a test of hypothesis is used to decide whether to reject the null hypothesis in favor of the alternative hypothesis?

In a test of H0:μ=100againstHa:μ>100, the sample data yielded the test statistic z = 2.17. Find and interpret the p-value for the test.
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