were each in the same highly speculative credit rating category: statistically, they represent a

random sample from the population of CCC-rated companies. The rating agency contends that

the historical (population) default rate for this category is 10.0%, in contrast to the 15.0%

default rate observed in the sample. Is there statistical evidence, with any high confidence,

that the true default rate is different than 10.0%; i.e., if the null hypothesis is that the true

default rate is 10.0%, can we reject the null?

a) No, the t-statistic is 0.39

b) No, the t-statistic is 1.08

c) Yes, the t-statistic is 1.74

d) Yes, the t-statistic is 23.53

Question - As per explanation the Standard error is calculated in 2 ways-

n=60

standard error = SQRT(15%*85%/60) = 0.046098 OR

standard error = SQRT(10%*90%/60)=0.046098

I did not understand the term ( 15%*85% or 10%*90% in numerator ) . how does that define the std deviation?

The Standard error formula is

standard error = Variance / Sqrt(n) or

standard error = SQRT(std deviation / n)

Please explain.

Thanks

Nilesh