EXAMPLE 6.11

Average scholarship amount of borrowers and nonborrowers: The test statistic. In Example 6.8, the estimate of the difference is $425. Using methods that we will discuss in detail later, we can determine that the standard deviation of the estimate is $353. For this problem the test statistic is

For our data,

We have observed a sample estimate that is one and one-fifth standard deviations away from the hypothesized value of the parameter.