Restaurant Bills.

Data were collected on the amount spent by 64 customers for

lunch at a major Houston restaurant. These data are contained in the file Houston.
Based upon past studies the population standard deviation is known with σ = $6.
➢ At 99% confidence, what is the margin of error?
➢ Develop a 99% confidence interval estimate of the mean amount spent for
lunch.

Cost of Message Therapy Sessions. Studies show that massage therapy has a
variety of health benefits and it is not too expensive. A sample of 10 typical one-
hour massage therapy sessions showed an average charge of $59. The population
standard deviation for a one-hour session is σ = $5.50.
➢ What assumptions about the population should we be willing to make if a
margin of error is desired?
➢ Using 95% confidence, what is the margin of error?
➢ Using 99% confidence, what is the margin of error?

Assisted-Living Facility Rent. Costs are rising for all kinds of medical care. The
mean monthly rent at assisted-living facilities was reported to have increased 17%
over the last five years to $3486. Assume this cost estimate is based on a sample
of 120 facilities and, from past studies, it can be assumed that the population
standard deviation is σ = $650.
➢ Develop a 90% confidence interval estimate of the population mean
monthly rent.
➢ Develop a 95% confidence interval estimate of the population mean
monthly rent.
➢ Develop a 99% confidence interval estimate of the population mean
monthly rent.
➢ What happens to the width of the confidence interval as the confidence
level is increased? Does this seem reasonable? Explain.
Weekly Sales Reports. 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.

Years to Bond Maturity. A sample containing years to maturity and yield for 40
corporate bonds are contained in the file CorporateBonds.
➢ What is the sample mean years to maturity for corporate bonds and what is
the sample standard deviation?
➢ Develop a 95% confidence interval for the population mean years to
maturity.
➢ What is the sample mean yield on corporate bonds and what is the sample
standard deviation?
➢ Develop a 95% confidence interval for the population mean yield on
corporate bonds.

Meal Cost in Hong Kong. The mean cost of a meal for two in a mid-range
restaurant in Tokyo is $40 (Numbeo.com website). How do prices for comparable
meals in Hong Kong compare? The file HongKongMeals contains the costs for
a sample of 42 recent meals for two in Hong Kong mid-range restaurants.
➢ With 95% confidence, what is the margin of error?
➢ What is the 95% confidence interval estimate of the population mean?
➢ How do prices for meals for two in mid-range restaurants in Hong Kong
compare to prices for comparable meals in Tokyo restaurants?

Gasoline Prices. The U.S. Energy Information Administration (US EIA) reported
that the average price for a gallon of regular gasoline is $2.94. The US EIA
updates its estimates of average gas prices on a weekly basis. Assume the standard
deviation is $.25 for the price of a gallon of regular gasoline and recommend the
appropriate sample size for the US EIA to use if they wish to report each of the
following margins of error at 95% confidence.
➢ The desired margin of error is $.10.
➢ The desired margin of error is $.07.
➢ The desired margin of error is $.05.
Salaries of Business Graduates. Annual starting salaries for college graduates
with degrees in business administration are generally expected to be between
$45,000 and $60,000. Assume that a 95% confidence interval estimate of the
population mean annual starting salary is desired. What is the planning value for
the population standard deviation? How large a sample should be taken if the
desired margin of error is
➢ $500?
➢ $200?
➢ $100?
➢ Would you recommend trying to obtain the $100 margin of error? Explain.

Health-Care Survey. In the spring of 2017, the Consumer Reports National

Research Center conducted a survey of 1007 adults to learn about their major
health-care concerns. The survey results showed that 574 of the respondents lack
confidence they will be able to afford health insurance in the future.
➢ What is the point estimate of the population proportion of adults who lack
confidence they will be able to afford health insurance in the future.
➢ At 90% confidence, what is the margin of error?
➢ Develop a 90% confidence interval for the population proportion of adults
who lack confidence they will be able to afford health insurance in the
future.
➢ Develop a 95% confidence interval for this population proportion.

Franchise Profits. According to Franchise Business Review, over 50% of all

food franchises earn a profit of less than $50,000 a year. In a sample of 142 casual
dining restaurants, 81 earned a profit of less than $50,000 last year.
➢ What is the point estimate of the proportion of casual dining restaurants
that earned a profit of less than $50,000 last year?
➢ Determine the margin of error and provide a 95% confidence interval for
the proportion of casual dining restaurants that earned a profit of less than
$50,000 last year.
➢ How large a sample is needed if the desired margin of error is .03?
Restaurant Bills.
a. With 99% confidence z /2 = z.005 = 2.576

Margin of error = 2.576 / n = 2.576(6 / 64 ) = 1.93

b. Confidence Interval: 21.52 + 1.93 or 19.59 to 23.45

Cost of Message Therapy Sessions.

a. Because n is small, an assumption that the population is at least

approximately normal is required so that the sampling distribution of

x can be approximated by a normal distribution.

b. Margin of error: z.025 ( / n ) = 1.96(5.5 / 10) = 3.41

c. Margin of error: z.005 ( / n ) = 2.576(5.5 / 10) = 4.48

Assisted-Living Facility Rent.


x  z / 2
a. n

3,486 + 1.645 (650 / 120 )

3,486 + 98 or $3388 to $3584

b. 3,486 + 1.96 (650 / 120 )

3,486 + 116 or $3370 to $3602

c. 3,486 + 2.576 (650 / 120 )

3,486 + 153 or $3,333 to $3,639

The confidence interval gets wider as we increase our confidence level.

We need a wider interval to be more confident that the interval will

 contain the population mean.

Weekly Sales Reports.

x  t / 2 ( s / n)

90% confidence df = 64 t.05 = 1.669

19.5 ± 1.669 (5.2 / 65)

19.5 ± 1.08 or 18.42 to 20.58

95% confidence: df = 64 t.025 = 1.998

19.5 ± 1.998 (5.2 / 65)

19.5 ± 1.29 or 18.21 to 20.79

Years to Bond Maturity.

a. Using JMP or Excel, x = 9.7063 and s = 7.9805

The sample mean years to maturity is 9.7063 years with a standard

deviation of 7.9805.

b. x  t.025 ( s / n) , df = 39, t.025 = 2.023

9.7063 ± 2.023 (7.9805 / 40)

9.7063 ± 2.5527 or 7.1536 to 12.2590

The 95% confidence interval for the population mean years to maturity

is 7.1536 to 12.2590 years.

c. Using JMP or Excel, x = 3.8854 and s = 1.6194

The sample mean yield on corporate bonds is 3.8854% with a standard

deviation of 1.6194.
 d. x  t.025 ( s / n) df = 39 t.025 = 2.023

3.8854 ± 2.023 (1.6194 / 40)

3.8854 ± .5180 or 3.3674 to 4.4034

The 95% confidence interval for the population mean yield is 3.3674 to

4.4034%.

Meal Cost in Hong Kong.

a. t.025 ( s / n) , df = 41

t.025 = 2.02, s = 6.827

2.02 (6.827 / 42) = 2.13

x  t.025 ( s / n)
b.

32.66 ± 2.13 or $30.53 to $34.79

c. The mean cost for a mid-range meal for two in Tokyo ($40) is not in the

95% confidence interval for comparable meals in Hong Kong. The mean

cost of comparable meals in Hong Kong is less than in Tokyo.

Gasoline Prices.
a.
2
z.025 2 (1.96) 2 (.25) 2 Use 25.
n= = = 24.01
E2 (.10) 2

If the normality assumption for the population appears questionable, this

should be adjusted upward to at least 30.

b. (1.96) 2 (.25) 2
n= = 49
(.07) 2

Use 49 to guarantee a margin of error no greater than .07. However, the

 U.S. EIA may choose to increase the sample size to a round number of

50.

c. (1.96) 2 (.25) 2 Use 97

n= = 96.04
(.05) 2

For reporting purposes, the U.S. EIA might decide to round up to a

sample size of 100.

Salaries of Business Graduates.

60, 000 − 45, 000
Planning value = = 3750
4

2
z.025 2 (1.96) 2 (3750) 2
n= = = 216.09 Use n = 217
a. E2 (500) 2

(1.96) 2 (3750) 2
n= = 1350.56 Use n = 1351
(200) 2
b.

(1.96) 2 (3750) 2
n= = 5402.25 Use n = 5403
(100) 2
c.

d. Sampling 5,403 college graduates to obtain the $100 margin of error

would be viewed as too expensive and too much effort by most

researchers.

Health-Care Survey.
a. p = 574/1007 = .57

b. Margin of Error

p (1 − p ) 0.57(0.43)
z.05 = 1.645 = 0.0257
n 1007

c. Confidence interval:

.57 ± .0257 or .5443 to .5927

 d. Margin of Error

p (1 − p ) 0.57(0.43)
z.025 = 1.96 = 0.0306
n 1007

95% confidence interval

.57 + .0306 or .5394 to .6006

Franchise Profits.
a. p = 81/142 = .5704

b. Margin of error = 1.96 p (1 − p ) (.5704)(.4296)

= 1.96 = .0814
n 142

Confidence interval: .5704 + .0814 or .4890 to .6518

1.962 (.5704)(.4296)
n= = 1046
(.03) 2
c.