A check-cashing service has found that approximately 5% of all checks submitted to the
service for cashing are bad. After instituting a check verification system to reduce its
losses, the service found that only 45 checks were bad in a total of 1124 cashed.

a). At 5% level of significance, is there sufficient evidence to conclude that the system
has been effective? Your conclusion must be in terms of the P-Value as well as
setting up a Rejection Region. You must show all necessary work.
b). Which statistical distribution should be applied in this situation and why? Explain
carefully.
c). Knowing that a significant amount of capital investment were required to institute the
system, should the service put much weight on the conclusion of part (a)? Explain
carefully.

A check-cashing service has found that approximately 5% of all checks submitted to the
service for cashing are bad. After instituting a check verification system to reduce its
losses, the service found that only 45 checks were bad in a total of 1124 cashed.

a). Based on a 95% confidence level, what is the best case and worst case scenario
regarding the percentage of bad checks?
b). Carefully interpret this interval estimation.
c). Using the results of part (a), explain carefully whether or not there is sufficient
evidence to conclude that the system has been effective? Explain carefully.

A check-cashing service has found that approximately 5% of all checks submitted to the
service for cashing are bad. After instituting a check verification system to reduce its
losses, the service found that only 45 checks were bad in a total of 1124 cashed.

a). At 5% level of significance, is there sufficient evidence to conclude that the system
has been effective? Your conclusion must be in terms of the P-Value as well as
setting up a Rejection Region. You must show all necessary work.
b). Which statistical distribution should be applied in this situation and why? Explain
carefully.
c). Knowing that a significant amount of capital investment were required to institute the
system, should the service put much weight on the conclusion of part (a)? Explain
carefully.
d). Based on a 95% confidence level, what is the best case and worst case scenario
regarding the percentage of bad checks?
e). Carefully interpret this interval estimation.
f). Using the results of part (d), explain carefully whether or not there is sufficient
evidence to conclude that the system has been effective? Explain carefully.