Confidence Interval and Sample Size
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Piggy Bank is a ficticious company.
Piggy Bank wants to estimate the mean dollars that each card holder will spend each month. It would like to be within plus or minus $10 of the true mean with a 98% confidence level. The standard deviation is thought to be $500. How many card holders should be sampled? After you've determined how many card holders should be sampled, Piggy Bank comes back and says that it will cost $5 per sample and they were only planning on spending $10,000 on the sample. In a memo to the Piggy Bank product development team indicate how many card holders should be sampled to meet the original requirements of the sample. Then explain the trade-offs that will occur when you lower the sample to $10,000 to meet their budget.
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