In the past, the value of houses a local realtor has sold is normally distributed with a mean of $234,000 with a standard deviation of $55,000. What is the probability that over the next 65 houses the realtor sells, the mean value is at least $225,000.

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Answer:

90.66% probability that over the next 65 houses the realtor sells, the mean value is at least $225,000.

Step-by-step explanation:

To solve this problem, it is important to kknow the Normal probability distribution and the Central Limit Theorem.

Normal probability distribution

Problems of normally distributed samples can be solved using the z-score formula.

In a set with mean [tex]\mu[/tex] and standard deviation [tex]\sigma[/tex], the zscore of a measure X is given by:

[tex]Z = \frac{X - \mu}{\sigma}[/tex]

The Z-score measures how many standard deviations the measure is from the mean. After finding the Z-score, we look at the z-score table and find the p-value associated with this z-score. This p-value is the probability that the value of the measure is smaller than X, that is, the percentile of X. Subtracting 1 by the pvalue, we get the probability that the value of the measure is greater than X.

Central Limit Theorem

The Central Limit Theorem estabilishes that, for a random variable X, with mean [tex]\mu[/tex] and standard deviation [tex]\sigma[/tex], a large sample size can be approximated to a normal distribution with mean [tex]\mu[/tex] and standard deviation [tex]\frac{\sigma}{\sqrt{n}}[/tex]

In this problem, we have that:

[tex]\mu = 234000, \sigma = 55000, n = 65, s = \frac{55000}{\sqrt{65}} = 6821.91[/tex]

What is the probability that over the next 65 houses the realtor sells, the mean value is at least $225,000.

This probability is 1 subtracted by the pvalue of Z when X = 225. So

[tex]Z = \frac{X - \mu}{\sigma}[/tex]

By the Central Limit Theorem, we have that:

[tex]Z = \frac{X - \mu}{s}[/tex]

[tex]Z = \frac{225000 - 234000}{6821.91}[/tex]

[tex]Z = -1.32[/tex]

[tex]Z = -1.32[/tex] has a pvalue of 0.0934.

So there is a 1-0.0934 = 0.9066 = 90.66% probability that over the next 65 houses the realtor sells, the mean value is at least $225,000.

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