A study of 8 worldwide financial institutions showed the cor

A study of 8 worldwide financial institutions showed the correlation between their assets and pretax profit to be .75. State the decision rule for .010 significance level: H0: Compute the value of the test statistic.

Solution

1.

As

df = n - 2 = 6

Then at 0.01 level, one tailed t test, the critical t value is

tcrit = 3.142668403

Thus, we Reject Ho if t > 3.142668403. [ANSWER]

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2.

Here, as

t = r sqrt[(n-2)/(1-r^2)]

Then

t = 0.75*sqrt((8-2)/(1-0.75^2)) = 2.777460299 [ANSWER]