Question

A direct-mail sales company must determine its credit policies quite carefully. Suppose that the firm suspects that advertisements in a certain magazine have led to an excessively high rate of write-offs (accounts regarded as uncollectible). The firm wants to establish 90% confidence interval for this magazine’s write-off proportion that is accurate to 0.02. (a) How many accounts must be sampled to guarantee this goal? (b) If this many (the sample size n computed in part a) accounts are sampled and 10% of the sampled accounts are determined to be write-offs, what is the resulting 90% confidence intervals?

Answer 1