Question: Wall Street securities firms paid out record year-end bonuses of $125,500 per employee

for 2005 (Fortune, February 6, 2006). Suppose we would like to take a sample of employ-

ees at the Jones & Ryan securities firm to see whether the mean year-end bonus is different

from the reported mean of $125,500 for the population.

1. State the null and alternative hypotheses you would use to test whether the year-end
   bonuses paid by Jones & Ryan were different from the population mean.
2. Suppose a sample of 40 Jones & Ryan employees showed a sample mean year-end
   bonus of $118,000. Assume a population standard deviation of α = $30,000 and com-
   pute the p-value.
3. With α = .05 as the level of significance, what is your conclusion?
4. Repeat the preceding hypothesis test using the critical value approach.

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