Week – 8

Q – 1: The average starting salary of students who graduated from colleges of Business in 2009
was $48,400. A sample of 100 graduates of 2010 showed an average starting salary of $50,000.
Assume the standard deviation of the population is known to be $8000. We want to determine
whether or not there has been a significant increase in the starting salaries.

Step – 1: Ho: ս = 48,400 Vs. Ha = ս > 48,400

Step – 2: Test Statistics formula is Z Stat =(ᵹ −ս) ¿

¿¿

Step – 3: at α = 0.05 level of confidence interval (general level)

Step – 4: Decision rule: - Reject Ho, if Z Stat > 1.645

1.645

n = 100, ᵹ = 5,000, σ = 8,000

( 5000−48400 )
Z Stat =
Step – 5: The test statistics is equal to 8000
√ 100
Z Stat =2.00

Step – 6: Conclusion: - Reject null hypothesis Ho; therefore, it can be concluded that there is an
increase in the starting salaries.