Question 4 of 10
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Answer:
0.9099 = 90.99% probability that at most 25% of those are used as investment property.
Step-by-step explanation:
To solve this question, we need to understand the normal probability distribution and the central limit theorem.
Normal Probability Distribution:
Problems of normal distributions can be solved using the z-score formula.
In a set with mean and standard deviation
, the z-score of a measure X is given by:
The Z-score measures how many standard deviations the measure is from the mean. After finding the Z-score, we look at the z-score table and find the p-value associated with this z-score. This p-value is the probability that the value of the measure is smaller than X, that is, the percentile of X. Subtracting 1 by the p-value, we get the probability that the value of the measure is greater than X.
Central Limit Theorem
The Central Limit Theorem estabilishes that, for a normally distributed random variable X, with mean and standard deviation
, the sampling distribution of the sample means with size n can be approximated to a normal distribution with mean
and standard deviation
.
For a skewed variable, the Central Limit Theorem can also be applied, as long as n is at least 30.
For a proportion p in a sample of size n, the sampling distribution of the sample proportion will be approximately normal with mean and standard deviation
23% of all homes purchased in 2004 were considered investment properties.
This means that
Sample of 800 homes
This means that
Mean and Standard deviation:
What is the probability that at most 25% of those are used as investment property?
This is the pvalue of Z when X = 0.25. So
has a pvalue of 0.9099
0.9099 = 90.99% probability that at most 25% of those are used as investment property.