Page 24 - FINAL CFA I SLIDES JUNE 2019 DAY 4

Why can’t we just 2.49 is for a sample Session Unit 3:
compare 2.49 and 2.5 directly? and there is SE? Yes?
12. Hypothesis Testing

Example, o.287 : z vs t test: Which way?
When your company’s ‘desk cutting’ machine is properly aligned, the mean length of desks is 2.5 inches. When out of
alignment, desks cut are too long or too short. Production then is stopped to adjust the machine. Each day quality
control takes a sample to test, and today, a random sample of 49 desks showed a mean length of 2.49 inches. The
population SD is known to be 0.021 inches. At 5% SL, should the machine be shut down?

The z-Test | The t-Test

Let μ = mean length of all desks (population)

x = the corresponding mean for the sample.

Reject Ho if
t0.05/2 > 2.010

Use population SD
since we don’t have
Compute z/t sample’s?

So same result!
Z/t: Sufficient evidence to reject Ho

Machine is out of adjustment and should be shut down for repair.