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3 years ago

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The distribution of income tax refunds follow an approximate normal distribution with a mean of $7010 and a standard deviation o

f $43. All of the income tax returns claiming the largest 0.15 % of refunds will be audited. Use the Empirical Rule to determine approximately above what dollar value must a refund be before it is audited.

1 answer:

Andrej [43]3 years ago

5 0

Answer:

A refund must be above $7,139 before it is audited.

Step-by-step explanation:

The Empirical Rule states that, for a normally distributed random variable:

Approximately 68% of the measures are within 1 standard deviation of the mean.

Approximately 95% of the measures are within 2 standard deviations of the mean.

Approximately 99.7% of the measures are within 3 standard deviations of the mean.

In this problem, we have that:

Mean = 7010, standard deviation = 43.

Approximately 99.7% of the measures are within 3 standard deviations of the mean.

The empirical rule is symmetric, which means that the lowest (100-99.7)/2 = 0.15% is at least 3 standard deviations below the mean, and the upper 0.15% is at least 3 standard deviations above the mean.

Use the Empirical Rule to determine approximately above what dollar value must a refund be before it is audited.

3 standard deviations above the mean, so:

7010 + 3*43 = 7139.

A refund must be above $7,139 before it is audited.

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A simple random sample of size n is drawn from a population that is normally distributed. The sample mean, x overbar, is found

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(a) 80% confidence interval for the population mean is [109.24 , 116.76].

(b) 80% confidence interval for the population mean is [109.86 , 116.14].

(c) 98% confidence interval for the population mean is [105.56 , 120.44].

(d) No, we could not have computed the confidence intervals in parts (a)-(c) if the population had not been normally distributed.

Step-by-step explanation:

We are given that a simple random sample of size n is drawn from a population that is normally distributed.

The sample mean is found to be 113 and the sample standard deviation is found to be 10.

(a) The sample size given is n = 13.

Firstly, the pivotal quantity for 80% confidence interval for the population mean is given by;

P.Q. = $\frac{\bar X-\mu}{\frac{s}{\sqrt{n} } }$ ~ $t_n_-_1$

where, $\bar X$ = sample mean = 113

s = sample standard deviation = 10

n = sample size = 13

$\mu$ = population mean

<em>Here for constructing 80% confidence interval we have used One-sample t test statistics as we don't know about population standard deviation.</em>

<u>So, 80% confidence interval for the population mean, </u> $\mu$ <u> is ;</u>

P(-1.356 < $t_1_2$ < 1.356) = 0.80 {As the critical value of t at 12 degree

of freedom are -1.356 & 1.356 with P = 10%}

P(-1.356 < $\frac{\bar X-\mu}{\frac{s}{\sqrt{n} } }$ < 1.356) = 0.80

P( $-1.356 \times }{\frac{s}{\sqrt{n} } }$ < ${\bar X-\mu}$ < $1.356 \times }{\frac{s}{\sqrt{n} } }$ ) = 0.80

P( $\bar X-1.356 \times }{\frac{s}{\sqrt{n} } }$ < $\mu$ < $\bar X+1.356 \times }{\frac{s}{\sqrt{n} } }$ ) = 0.80

<u>80% confidence interval for </u> $\mu$ = [ $\bar X-1.356 \times }{\frac{s}{\sqrt{n} } }$ , $\bar X+1.356 \times }{\frac{s}{\sqrt{n} } }$ ]

= [ $113-1.356 \times }{\frac{10}{\sqrt{13} } }$ , $113+1.356 \times }{\frac{10}{\sqrt{13} } }$ ]

= [109.24 , 116.76]

Therefore, 80% confidence interval for the population mean is [109.24 , 116.76].

(b) Now, the sample size has been changed to 18, i.e; n = 18.

So, the critical values of t at 17 degree of freedom would now be -1.333 & 1.333 with P = 10%.

<u>80% confidence interval for </u> $\mu$ = [ $\bar X-1.333 \times }{\frac{s}{\sqrt{n} } }$ , $\bar X+1.333 \times }{\frac{s}{\sqrt{n} } }$ ]

= [ $113-1.333 \times }{\frac{10}{\sqrt{18} } }$ , $113+1.333 \times }{\frac{10}{\sqrt{18} } }$ ]

= [109.86 , 116.14]

Therefore, 80% confidence interval for the population mean is [109.86 , 116.14].

(c) Now, we have to construct 98% confidence interval with sample size, n = 13.

So, the critical values of t at 12 degree of freedom would now be -2.681 & 2.681 with P = 1%.

<u>98% confidence interval for </u> $\mu$ = [ $\bar X-2.681 \times }{\frac{s}{\sqrt{n} } }$ , $\bar X+2.681 \times }{\frac{s}{\sqrt{n} } }$ ]

= [ $113-2.681 \times }{\frac{10}{\sqrt{13} } }$ , $113+2.681 \times }{\frac{10}{\sqrt{13} } }$ ]

= [105.56 , 120.44]

Therefore, 98% confidence interval for the population mean is [105.56 , 120.44].

(d) No, we could not have computed the confidence intervals in parts (a)-(c) if the population had not been normally distributed because t test statistics is used only when the data follows normal distribution.

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