Reference no: EM131717720

A study by the Massachusetts Community & Banking Council found that blacks, and, to a lesser extent, Latinos, remain largely unable to borrow money at the same interest rate as whites (Boston Globe, February 28, 2008). The following contingency table shows representative data for the city of Boston, cross-classified by race and type of interest rate received: (Use Table 3).

Type of Interest Rate on Loan

Race High Interest Rate Lower Interest Rate

Black 553        480

Latino 265        324

White 491        3701

At the 5% significance level, do the data indicate that the interest rate received on a loan is dependent on race?

a. Choose the appropriate null and alternative hypotheses.

H0: Interest rate received is independent of race.; HA: Interest rate received is dependent on race.

H0: Interest rate received is dependent of race.; HA: Interest rate received is independent on race.

b. Calculate the value of the test statistic. (Round intermediate calculations to at least 4 decimal places and final answer to 2 decimal places.)

Test statistic

c. Specify the decision rule. (Round your answer to 3 decimal places.)

Reject H0 if formula270.mml > 

d. What is your conclusion?

Reject H0; there is enough evidence to support the claim that interest rate and race are dependent.

Reject H0; there is not enough evidence to support the claim that interest rate and race are dependent.

Do not reject H0; there is enough evidence to support the claim that interest rate and race are dependent.

Do not reject H0; there is not enough evidence to support the claim that interest rate and race are dependent.