2c

Our first assumption is that the two samples are independent of each other. This means that
any changes in the interest rates of a plan would not affect the interest rates of the other
plan. Should this assumption be violated, the follow up action would be to test the results
using paired t-test. A paired t-test measures the distribution of difference in means of the two
observations (textbook).

The second assumption is that the sample sizes are equal in count and the samples are of the
same start and end date. This assumption would have been violated should the data retrieved
be of different dates or if the data retrieved is inadequate. A solution to this violation would
be to conduct a two sample hypothesis test. The two sample hypothesis test assumes that
the two sample means follow a normal distribution(textbook). With this test, we are able to
identify if the interest rates between the two plans similar or vastly different.

4a
One statistical concern that would arise while deciding on an investment plan would be the
misuse of graphs to attract potential investors. In context, graphs would be used to show a
visual representation of how the interest rates of each plan changes over time. However, one
could narrow to a section and only reveal favorable changes the potential investors to assure
them that the plan presented is profitable (Investopedia, lie with financial statistics). For
example, a graph presented to investors would show increases year after year. However, they
have decided to hide the statistics of the previous years when they experienced a sharp drop
in their interest rates. Therefore, it is important for investors to have access to the entire
graph to make informed choices when investing.

Another statistical concern is the use of means to mislead investors into investing. In context,
the mean of a year’s interest rates is often used to sell the investment plans. However, this
could also be used to mislead the investors. A favorable mean does not suggest a stable
interest rate throughout the year. A favorable mean may be calculated with high interest
rates in a period followed low interest rates. On the other hand, a plan could have a relatively
lower mean as the previous plan but it could have a stable interest rate throughout the year.
This information would have been unpredictable with just knowing the mean. Therefore, it
is important for investors to have access to other information such as the mode of the interest
rates. The mode reveals the most frequent interest rate that occurs throughout the year. With
these two information, the investor would know if the interest rates are stable throughout
the year.