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Mortgage Rates Analysis for Small Banks

The document reports on a study that analyzed 30-year mortgage rates at small banks. It tested the hypothesis that the average rate is less than 6% using a sample of rates from 8 banks. The average rate was 5.64% and the p-value was calculated to be 0.053. Since the p-value is greater than 0.01, the study failed to reject the null hypothesis that the average rate is not less than 6%.

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Wiwik Rachmarwi
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257 views2 pages

Mortgage Rates Analysis for Small Banks

The document reports on a study that analyzed 30-year mortgage rates at small banks. It tested the hypothesis that the average rate is less than 6% using a sample of rates from 8 banks. The average rate was 5.64% and the p-value was calculated to be 0.053. Since the p-value is greater than 0.01, the study failed to reject the null hypothesis that the average rate is not less than 6%.

Uploaded by

Wiwik Rachmarwi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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A recent article in The Wall Street Journal reported that the 30-year mortgage rate is now less than 6

percent. A sample of eight small banks in the Midwest revealed the following 30-year rates (in
percent):

4.8 5.3 6.5 4.8 6.1 5.8 6.2 5.6

At the .01 significance level, can we conclude that the 30-year mortgage rate for small banks is less
than 6 percent? Estimate the p-value.

---

Ho: p>= 6

H1: p < 6 (claim)

-----

p-hat = 5.64

test stat: z(5.64) = (5.64-6)/[0.63/sqrt(8)] = -1.6162..

---

p-value: P(z< -1.6162) = 0.0530

----

Conclusion:

Since the p-value is greater than 1%, fail to reject Ho.

The test results support the claim at the 1% level.

A recent article in the Wall Street Journal reported that the 30-year mortgage rate is now less than
6 percent. A sample of eight small banks in the Midwest revealed the following 30- year rates (in
percent):

-year mortgage rate for small banks is less than 6 percent? Estimate the p-value.

Solution: We need to test the following hypotheses:

This corresponds to a left-tailed t-test. The t-statistics is computed as


From the given data we have

Therefore,

The p-value is computed as

Since the p-value is greater than the significance level 0.01, we fail to reject the null hypothesis.

In words, we conclude that there is not enough evidence to say that the 30-year mortgage for small
banks is less than 6%, at α = 0.01.r

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