Armed Forces Credit Union would like to examine the required sample size needed to be able to estimate the mean dollars that each card holder will spend each month. It would like to be within plus or minus $10 of the true mean with a 98% confidence level. The standard deviation is thought to be $500. How many card holders should be sampled?
After you have determined how many card holders should be sampled, Armed Forces Credit Union comes back and says that it will cost $5 per sample, and it was only planning on spending $10,000 on the sample. In a memo to the Armed Forces Credit Union product development team, indicate how many card holders should be sampled to meet the original requirements of the sample. Explain the trade-offs that will occur when you lower the sample to $10,000 to meet the budget.