A local retail company wants to estimate the mean amount spent by customers. Their store's budget limits the number of surveys to 225. What is their maximum error of the estimated mean amount spent for a 99% level of confidence and an estimated standard deviation of $10.00?
A)$10
B)$1.00
C)1%
D)$1.72

Question

Quizplus · Accepted Answer

We need to use the formula for the margin of error:

Margin of Error = Z * (σ/√n)

Where:
Z = Z-score for the desired level of confidence (99% = 2.576)
σ = estimated standard deviation ($10.00)
n = sample size (225)

Plugging in the values:

Margin of Error = 2.576 * (10.00/√225) = 2.576 * 0.667 = 1.72

Therefore, the maximum error of the estimated mean amount spent is $1.72. Answer D is correct.

A Local Retail Company Wants to Estimate the Mean Amount