Suppose a subdivision on the southwest side of Denver, Colorado, contains 1,500 houses. The subdivision was built in 1983. A sample of 120 houses is selected randomly and evaluated by an appraiser. If the mean appraised value of a house in this subdivision for all houses is $228,000, with a standard deviation of $8,500, what is the probability that the sample average is greater than $229,500?

0.0268 = 2.68% probability that the sample average is greater than $229,500

Step-by-step explanation:

To solve this question, we need to understand the normal probability distribution and the central limit theorem.

Normal probability distribution

When the distribution is normal, we use the z-score formula.

In a set with mean and standard deviation , the zscore of a measure X is given by:

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 normally distributed random variable X, with mean and standard deviation , the sampling distribution of the sample means with size n can be approximated to a normal distribution with mean and standard deviation .

For a skewed variable, the Central Limit Theorem can also be applied, as long as n is at least 30.

Single house:

The mean appraised value of a house in this subdivision for all houses is $228,000, with a standard deviation of $8,500, which means that

Sample:

Sample of 120, so, by the central limit theorem,

What is the probability that the sample average is greater than $229,500?

This is 1 subtracted by the pvalue of Z when X = 229.5. So

By the Central Limit Theorem

has a pvalue of 0.9732

1 - 0.9732 = 0.0268

0.0268 = 2.68% probability that the sample average is greater than $229,500

a line is an defined derm because it

a)contains an infinite number of points b) can be used to create other geometric shapes c)describes something that does not have width or depth d) is a term that does not have a formal definition. a line is an undefined term because it: contains an infinite number of points.