Calculate the Appropriate Test Statistic

question 16

Multiple Choice

Calculate the appropriate test statistic.
-Insurance companies track life expectancy information to assist in determining the
Cost of life insurance policies. Last year the average life expectancy of all policyholders
Was 77 years. ABI Insurance wants to determine if their clients now have a longer life
Expectancy, on average, so they randomly sample 20 of their recently paid policies.
The sample has a mean of 78.6 years and a standard deviation of 4.48 years. What is the
Value of the test statistic?

• A) 1.896
• B) 2.355
• C) 1.987
• D) 2.176
• E) 1.597

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Definitions:

NPV

Net Present Value, a calculation used to determine the present value of a series of future cash flows by discounting them at a specific rate.

Cash Flows

The total amount of money being transferred into and out of a business, particularly concerning its operating, investing, and financing activities.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Capital Budget

An estimate of the major capital and investment expenditures over a period, and the means of financing them.