The Reason for Using the T-Distribution in a Hypothesis Test

question 106

Multiple Choice

The reason for using the t-distribution in a hypothesis test about the population mean is:

• A) the population standard deviation is unknown.
• B) it results in a lower probability of a Type I error occurring.
• C) it provides a smaller critical value than the standard normal distribution for a given sample size.
• D) the population is not normally distributed.

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Definitions:

Future Expectations

Anticipations or predictions about the economy or financial markets based on current events or trends that can influence consumer and investor behaviors.

Market Interest Rate

The prevailing rate at which borrowers can obtain loans and savers can earn on their investments in the open market.

Investment Decision

The process of evaluating the potential profitability or worth of an investment or project.

Financial Intermediaries

Institutions such as banks, mortgage companies, and finance companies, that serve as go-betweens, borrowing from people who have saved to make loans to others.