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Problems on Confidence Interval and

Sample Size Determination

Confidence Interval for Sample Mean (Population Standard Deviation Known)


σ σ
( x̄−z α /2 <= μ <= { x̄ +z α /2 )¿
√n √n Represents (1- α)100% confidence interval;
σ
z α /2
α is error. +/- √ n is the margin of error.
Problem 1: Comcast, the computer services company, is planning to invest heavily in online
television services. As part of the decision, the company wants to estimate the average
number of online shows a family of four would watch per day. A random sample of n = 100
families is obtained, and in this sample the average number of shows viewed per day is 6.5
and the population standard deviation is known to be 3.2. Construct a 90% confidence
interval for the average number of online television shows watched by the entire population
of families of 4.
Ans:

σ
x̄±z α /2 σ x̄ = x̄±z α /2
√n
3.2
¿6 .5±z 0. 025 =6 . 5±1 .96∗0 .32
√ 100
¿6 .5±0 .6272=(5. 87 ,7 .13)
OR,
5.87<μ<7.13
Problem 2: A survey of small business with Web Sites found that the average amount spent
on a site was INR 11,500 per year. Given a sample of 50 businesses and a population
standard deviation of σ =600, what is the margin of error? Use 95% confidence. What would
you recommend if the study required a margin of error of 150?
Ans:
Margin of error = z.025 ( / n )

z.025  1.96   $600 n  50

Margin of error = 1.96(600/ 50 ) = 166.31

A larger sample size would be needed to reduce the margin of error to $150 or less.

1.96(600 / n )  150

Solving for n shows n = 62


Confidence Interval for Sample Mean (Population Standard Deviation not Known,
n>=30)
Problem 4: Sales personnel for Skillings Distributors submit weekly reports listing the
customer contacts made during the week. A sample of 65 weekly reports showed a sample
mean of 19.5 customer contacts per week. The sample standard deviation was 5.2. Provide
90% and 95% confidence intervals for the population mean number of weekly customer
contacts for the sales personnel.
Ans:
s s
x  Z  x  1.96
Apply 2 n n Here x  19.5 , s=5.2, n=65

Confidence Interval for Sample Mean (Population Standard Deviation not Known)

s
x  t /2
n

Problem 3: A stock market analyst wants to estimate the average return on a certain stock. A
random sample of 15 days yields an average (annualized) return of x̄=10 .37 % and a standard
deviation of s = 3.5%. Assuming a normal population of returns, give a 95% confidence
interval for the average return on this stock.
Ans:
The critical value of t for df = (n -1) = (15 -1) =14 and a right-tail area of 0.025 is:
The corresponding confidence interval or interval estimate is: t 0.025=2.145
s 3.5
x  t0.025  10.37  2.145
n 15
 10.37  1.94
  8.43,12.31
Problem 5: A manufacturing company produces electric insulators .To test the strength of
the insulators, destructive testing is carried out to determine how much force is required to
break the insulators. This force is measured in pounds. A sample of 25 insulators was used in
the experiment to measure this force. It was found that the average force required to break the
insulators was 1723 pounds and the sample standard deviation of force was 89 pounds.
Estimate the mean amount of force required for the insulators with a 95% confidence level.
Ans:
n = 25, Sample mean = 1723, Sample Standard Deviation (s) = 89
Population Mean with 95% confidence interval
s
x  t /2
n
Dof = 25-1=24
So, 95% confidence interval,
1723 +/- t0.025,24(89/sqrt(25)) =1723+/-(2.064)*(17.8)=[1686, 1760]
Mean amount of force required for the insulators would lie between 1686 and 1780.

Confidence Interval for Sample Mean for large sample (Population Standard Deviation
not Known)
s
x̄±z α /2
√n
Problem 6: An economist wants to estimate the average amount in checking accounts at
banks in a given region. A random sample of 100 accounts gives x-bar = $357.60 and s =
$140.00. Give a 95% confidence interval for μ, the average amount in any checking account
at a bank in the given region.
Ans:
s 140.00
x  z0.025  357.60  1.96
n 100
 357.60  27.44
  330.16,385.04

Confidence Interval for Sample Proportion (Population Proportion unknown)


Problem 7: A marketing research firm wants to estimate the share that foreign companies
have in the American market for certain products. A random sample of 100 consumers is
obtained, and it is found that 34 people in the sample are users of foreign-made products; the
rest are users of domestic products. Give a 95% confidence interval for the share of foreign
products in this market.

p^ q^
^p±z α
2
√ n

Ans:

p^ q^ (0 .34 )(0 . 66 )
^p±z α
2
√ n
=0 .34±1 . 96

¿0 .34±(1. 96 )(0. 04737 )



100

¿0 .34±0 . 0928

Sample Size Determination for Desired Confidence Interval


Problem 8: A marketing research firm wants to conduct a survey to estimate the average
amount spent on entertainment by each person visiting a popular resort. The people who plan
the survey would like to determine the average amount spent by all people visiting the resort
to within $120, with 95% confidence. From past operation of the resort, an estimate of the
population standard deviation is s = $400. What is the minimum required sample size?
Ans:

z2  2
(1.96) 2 (400) 2
n 2
  42.684  43
E2 1202

Problem 9: The manufacturers of a sports car want to estimate the proportion of people in a
given income bracket who are interested in the model. The company wants to know the
population proportion, p, to within 0.01 with 99% confidence. Current company records
indicate that the proportion p may be around 0.25. What is the minimum required sample
size for this survey?
Ans:

z2 pq
2.5762 (0.25)(0.75)
n 2
  124.42  124
E2 0.102
Problem 10: In an organization it has been observed that all people do not respond to e-mail.
You have been given a task to estimate the proportion with a margin of 5 % on either side, of
office workers who respond to e-mail. Determine the sample size needed for a survey which
gives you 90% confidence.
Ans:
E = 0.05, so, use the formula for the margin of error for population proportion,
n = (1.64)2 * p(1-p)/E2
Assume, p = 0.5, so,
n = (1.64)2 * (0.5)2/(0.05)2
n= 2.69*100=269 (approx.)

Problem 11: A statistician estimates the 90% confidence interval for the mean of a normally
distributed population as 172.58 +/-3.74 at the end of a sampling experiment, assuming a
known population standard deviation. What is the 95% confidence interval?
Ans:

3. 74 3 . 74
Since z 90 ( σ / √ n )=3. 74 then ( σ / √ n )= = =2 .27356
z 90 1 . 645
z 95 ( σ / √ n )=1 . 96 ( 2. 27356 )=4 . 456
The 95 % C . I .: 172 .58±4 . 456
Question:12 The distribution of annual earnings of all bank tellers with five year experience
is skewed negatively. This distribution has a mean of $19,000 and a standard deviation of
$2,000. If we draw a random sample of 30 tellers, what is the probability that their earnings
will average more than $19,750 annually?
Solution: Standard error= $ 365.16
Prob.=0.0202
Question 13. Suppose we are interested in a population of 20 textile companies of the same
size, all of which are experiencing excessive labor turnover. Our study indicates that the
standard deviation of the distribution of annual turnover is 75 employees. If we sample five
of these companies, then compute the standard error of the mean.
Sol. N=20, n=5 σ=75
S.E=29.8 FPM=0.888
Question: 14 From a population of 125 items with a mean of 105 and a standard deviation of
17, 64 items were chosen.
(a) What is the standard error of the mean?
(b) What is the P(107.5 < X́ < 109)?
Ans: a) 1.4904
b) 0.0428
Question.15 The owner of the Home Loan Company randomly surveyed 150 of the
company’s 3,000 accounts and determined that 60 percent were in excellent standing.
a)Find a 95%confidence interval for the proportion in excellent standing.
(b) Based on part (a), what kind of interval estimate might you give for the absolute number
of accounts that meets the requirements of excellence , keeping 95% confidence level?
Ans: (a) ṕ ±1.96σ ṕ= 0.6 ±1.96*0.390=(0.524,0.676)
(b) 3000*(0.524,0.676)
Question 16 The manufacturers of a sports car want to estimate the proportion of people in a
given income bracket who are interested in the model. The company wants to know the
population proportion, p, to within 0.01 with 99% confidence. Current company records
indicate that the proportion p may be around 0.25. What is the minimum required sample
size for this survey?

z2 pq
2.5762 (0.25)(0.75)
n 2

Ans: E2 (0.01) 2

Question 17 Neelesh Pant is the production manager for Citrus Groves Inc., located just north
of Ranikhet, Uttarakhand. Neelesh is concerned that the last 3 years’ late freezes have
damaged the 2,500 orange trees that Citrus Groves owns. In order to determine the extent of
damage to the trees, Neelesh has sampled the number of oranges produced per tree for 42
trees and found that the average production was 525 oranges per tree and the standard
deviation was 30 oranges per tree. Assuming the data is normally distributed
(a) Estimate the population standard deviation from the sample standard deviation.
(b) Estimate the standard error of the mean for the finite population
(c) Construct a 98% confidence interval for the mean per tree output of all 2500 trees.
(d) If the mean orange output per tree was 600 oranges 5 years ago, what can Neelesh say
about the possible existence of damage now?
Ans: Use FPM formula here