Question: Marital Status and Bad Debts

Lending institutions are required to keep information about bad debt rates for different customer demographic groups. This information is used to assess the lending risks associated with the different groups and assign the appropriate lending rates.

A consumer finance company studies bad-debt experience for married and unmarried couples. The results can be found in the worksheet named Married vs. Debt in the accompanying spreadsheet. In the "marital status" column, 1 = married and 0 = unmarried. In the "bad debt" column, 1 = bad debt and 0 = no bad debt.

1. Construct a two-way table of frequencies, with the marital status as the row variable and debt status as the column variable.
2. Calculate the proportions of people having bad debt (i.e., the bad debt rates) for both the married and unmarried groups.
3. The Superintendent of Financial Institutions uses 4% as a recommended maximum allowable bad debt rate in any one customer group. Do the data provide evidence that the unmarried group is worse than this benchmark? Carry out the appropriate hypothesis test.
4. Find a 95% confidence interval for the proportion of married couples who have bad debts.
5. Is there significant evidence the bad debt rate for married couples is different from that of unmarried couples? Use a Z-test to answer this.

Price: $2.99

Solution: The downloadable solution consists of 4 pages
Deliverable: Word Document