Step 1: Name the Test and Check Conditions
Test: Significance test for a single proportion
Conditions:
Randomness: Assume the spins were done at random
Sample Size:
np₀ = 40 * 0.5 = 20 > 10
n(1 - p₀) = 40 * (1 - 0.5) = 20 > 10
Population Size: 10n = 400 < total number of spins of pennies (infinitely many)
Step 2: State the Hypotheses
Null Hypothesis (H₀): P = P₀
Alternative Hypothesis (Hₐ): P ≠ P₀
Step 3: Calculate Test Statistic and z*
z: (0.25 - 0.5) / √((0.5 * 0.5) / 40) = -3.162277
z:* ±1.96 (from the given significance level of 5%)
Conclusion:
Because z = -3.162277 < -1.96, the result is statistically significant.
We reject the null hypothesis in favor of the alternative hypothesis.
If the true proportion of heads was 50%, then it would be a rare event getting 10 out of 40 heads.
So we have evidence to believe the standard of 50% is not true.