Kora H.

asked • 03/02/20

Statistics question- Testing a Hypothesis (Type I and Type II errors)

Remember our bank that’s sending out DVDs to try to get customers to make payments on delinquent loans? It is looking for evidence that the costlier DVD strategy produces a higher success rate than the letters it has been sending. 

a. Explain what a Type I error is in this context and what the consequences would be to the bank.

b. What’s a Type II error in the bank experiment context, and what would the consequences be?

c. For the bank, which situation has higher power: a strategy that works really well, actually getting 60% of people to pay off their balances, or a strategy that barely increases the payoff rate to 32%? Explain briefly

2 Answers By Expert Tutors


Kenny S. answered • 03/11/20

0 (0)

Electrical Engineer, MBA, MS Fin, Math/Science Tutor ACT/SAT Prep

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