Question

In 1991 the average interest rate charged by U.S. credit card issuers was about 18.8 percent. Since then there has been a proliferation of new credit cards affiliated with retail stores, alumni associations, and so on. A financial officer wishes to study whether the increase in the credit card business has reduced interest rates. To do this the officer wants to estimate the current average interest rate charged by U.S. credit card issuer. To perform this task the officer randomly selects 5 credit cards and obtains the following interest rates for this sample: 14 18 16 17 20 Using the sample data provided above: a). Construct a 90% confidence interval for the current mean interest rate. b). Interpret the interval. c). Do we need to make any additional assumptions in order to make sure the confidence interval from a) is valid? Explain your answer. d). Think about the interpretation for the confidence interval. What does it mean to be “90% confident”?

          In 1991 the average interest rate charged by U.S. credit card
issuers was about 18.8 percent. Since then there has been a
proliferation of new credit cards affiliated with retail stores,
alumni associations, and so on. A financial officer wishes to study
whether the increase in the credit card business has reduced
interest rates. To do this the officer wants to estimate the
current average interest rate charged by U.S. credit card issuer.
To perform this task the officer randomly selects 5 credit cards
and obtains the following interest rates for this sample:
14
18
16
17
20
  Using the sample data provided above:
a). Construct a 90% confidence interval for the current mean
interest rate.
b). Interpret the interval.
c). Do we need to make any additional assumptions in order to
make sure the confidence interval from a) is valid? Explain your
answer.
d). Think about the interpretation for the confidence interval.
What does it mean to be “90% confident”?

Added by Becky Z.

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