The manager of a department store wants to determine what pr

The manager of a department store wants to determine what proportion of people who enter the store use the store\'s credit cards for their purchases. What size sample should be taken so that at 99% confidence, the error will not be more than 8%?

Solution

N ESTIMATION FROM P      
      
Note that      
      
n = z(alpha/2)^2 p (1 - p) / E^2      
      
where      
      
alpha/2 =    0.005  
      
Using a table/technology,      
      
z(alpha/2) =    2.575829304  
      
Also,      
      
E =    0.08  
p =    0.5  

[As we don\'t have a previous estimate for p, we assume p = 0.5, the worst case scenario].
      
Thus,      
      
n =    259.1756485  
      
Rounding up,      
      
n =    260 [ANSWER]