Direct mail advertisers send solicitations (“junk mail”) to thousands of potential customers in the hope that some will buy the company’s product. The response rate is usually quite low. Suppose a company wants to test the response to a new flyer and sends it to 1000 people randomly selected from their mailing list of over 200,000 people. They get orders from 123 of the recipients.
a) Create a 90% confidence interval for the percentage of people the company contacts who may buy something.
b) Explain what this interval means.
c) Explain what “90% confidence” means.
d) The company must decide whether to now do a mass mailing. The mailing won’t be cost-effective unless it produces at least a 5% return. What does your confidence interval suggest? Explain.

  • CreatedMay 14, 2015
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