A credit card company is about to send out a mailing to test the market for a new credit card. From that sample, they want to estimate the true proportion of people who will sign up for the card nation-wide. A pilot study suggests that about 0.5% of the people receiving the offer will accept it. To be within a tenth of a percentage point (0.001) of the true rate with 95% confidence, how big does the test mailing have to be?

We need a mailing list of at least 191112 people.

Step-by-step explanation:

In a sample with a number n of people surveyed with a probability of a success of , and a confidence level of , we have the following confidence interval of proportions.

In which

z is the zscore that has a pvalue of .

The margin of error is:

For this problem, we have that:

95% confidence level

So , z is the value of Z that has a pvalue of , so .

To be within a tenth of a percentage point (0.001) of the true rate with 95% confidence, how big does the test mailing have to be?

They need at least n people

n is found when . So

We need a mailing list of at least 191112 people.