Question

Lifetime of $1 Bills The average lifetime of circulated $1 bills is 18 months. A researcher believes that the average lifetime is not 18 months. He researched the lifetime of 50 $1 bills and found the average lifetime was 18.8 months. The population standard deviation is 2.8 months. At α = 0.02, can it be concluded that the average lifetime of a circulated $1 bill differs from 18 months?

Answer 1

Answer with explanation:

Let $\mu$ be the population mean lifetime of circulated $1 bills.

By considering the given information , we have :-

$H_0:\mu=18\\\\H_a:\mu\neq18$

Since the alternative hypotheses is two tailed so the test is a two tailed test.

We assume that the lifetime of circulated $1 bills is normally distributed.

Given : Sample size :  n=50 , which is greater than 30 .

It means the sample is large so we use z-test.

Sample mean : $\overline{x}=18.8$

Standard deviation : $\sigma=2.8$

Test statistic for population mean :-

$z=\dfrac{\overline{x}-\mu}{\dfrac{\sigma}{\sqrt{n}}}$

$\Rightarrow\ z=\dfrac{18.8-18}{\dfrac{2.8}{\sqrt{50}}}\approx2.02$

The p-value= $2P(z>2.02)=0.0433834$

Since the p-value (0.0433834) is greater than the significance level (0.02) , so we do not reject the null hypothesis.

Hence, we conclude that we do not have enough evidence to support the alternative hypothesis that the average lifetime of a circulated $1 bill differs from 18 months.