Business Statistics in Practice

Canadian 3rd Edition Bowerman

Solutions Manual
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 CHAPTER 9—Confidence Intervals
9.1 [LO1]

There is an entire population of possible sample means. A confidence interval is constructed

to be confident that the true value of μ is contained in that interval.

9.2 [LO1]

95% of the time the interval formed will contain the population mean.

9.3 [LO1]

population standard deviation is known, population is normal or n>30

9.4 [LO1]

It gets longer (wider).

9.5 [LO1]

It gets shorter (narrower)

9.6 [LO1]

  
 x  z / 2 
 n

  2 
a. 50  (1.96)  = [ 49.608, 50.392 ]
  100 

  2 
b. 50  (2.575)  = [49.485, 50.515]
  100 

  2 
c. 50  (2.17 )  = [49.566, 50.434 ]
  100 

  2 
d. 50  (1.28)  = [49.744, 50.256 ]
  100 

  2 
e. 50  3  = [49.400, 50.600 ]
  100 

  2 
f. 50  1.75  = [49.65,50.35]
  100 

9.7 [LO1]
 é æ 1.65 öù
ê25.575 ±1.96 ç ÷ú = [ 25.064, 26.086 ]
ë è 40 øû
a.
é æ 1.65 öù
ê25.575 ± 2.575ç ÷ú = [ 24.392, 26.758]
ë è 40 øû

b. Yes, 95% interval is above 25.

c. No, 99% interval extends below 25.

d. Fairly confident, since the 95% CI is above 25 while the 99% CI contains 25.

9.8 [LO1]

  2.47 
a. 5.46  1.96  = [4.976,5.944 ]
  100 
  2.47 
5.46  2.575  = [4.824,6.096 ]
  100 

b. Yes, 95% interval is below 6.

c. No, 99% interval extends above 6.

d. Fairly confident since 95% CI is below 6 while 99% CI contains 6.

9.9 [LO1]

  2.64 
a. 42.95  1.96  = [42.308,43.592 ]
  65 
  2.64 
42.95  2.575  = [ 42.107 ,43.793]
  65 

b. Yes, 95% interval is above 42.

c. Yes, 99% interval is above 42.

d. Very confident based on the 99% confidence interval being above 42.

9.10 [LO1]

  1.42 
a. 7.46  1.96  = [7.321, 7.599 ]
  400 

  1.55 
b. 12.44  1.96  = [12.288,12.592 ]
  400 

c. Yes, confidence interval in (b) is totally above the confidence interval in (a).
9.11 [LO1]

  33 
a. 82.6  1.96  = [76.132 ,89.068 ]
  100 

  37 
b. 93  1.96  = [85.748,100 .252 ]
  100 

c. Mean audit delay for public owner controlled companies appears to be shorter, since
there is only a small amount of overlap of the intervals.

9.12 [LO1]

  .71 
a. 3.3  2.575  = [3.235, 3.365]
  800 

  .66 
b. 4.3  2.575  = [ 4.224, 4.376 ]
  500 

c. Mean number of dealers visited by late replacement buyers appears to be higher.

9.13 [LO2]

a. Decreases

b. Decreases

9.14 [LO2]

When  is unknown, and the population you are sampling from is normal or approximately
normal.

9.15 [LO2]

For 11 df t.10 = 1.363, t.025 = 2.201, t.001 = 4.025

For 6 df t.10 = 1.440,t.025 = 2.447,t.001 = 5.208

9.16 [LO2]

  5 
a. 72  2.228  = [68.641, 75.359 ]
  11 

  5 
b. 72  3.169   = [67.223, 76.777 ]
  11 

  5 
c. 72  1.372   = [69.932 , 74.068 ]
  11 
   5 
d. 72  1.812   = [69.268, 74.732 ]
  11 

  5 
e. 72  2.764   = [67.833, 76.167 ]
  11 

  5 
f. 72  4.144   = [65.753, 78.247 ]
  11 

9.17 [LO2]

  1.8257 
a. 6  2.447   = [4.311, 7.689 ]
  7 
  1.8257 
6  3.707   = [3.442, 8.558]
  7 

b. Can be 95% confident the claim is true. Cannot be 99% confident the claim is true.

9.18 [LO2]

  0.984 
95% confidence interval: 2  (2.776)  = [0.778, 3.222]
  5 

No, lower end of confidence interval below 1 year. Sample size too small.

9.19 [LO2]

  1.026 
a. 7.4  2.145  = (6.832,7.968)
  15 

b. Yes, 95% interval is below 8.

9.20 [LO2]

é æ 3.54 öù
a. ê78.26 ± 2.776 ç ÷ú = [73.87, 82.66]
ë è 5 øû

b. We are at least 95% confident the mean is greater than 70 because the interval is above
70.

9.21 [LO2]

  19.6469 
a. 811  2.776  = [786 .609, 835 .391]
  5 

b. Yes, the 95% interval is above 750.

9.22 [LO2]

  1.6438  
a.  25.575  2.023    =  25.049, 26.101
  40  

b. Yes, interval is entirely greater than 25.

9.23 [LO2]

é æ 2.475 öù
a. ê5.46 ± 2 ç ÷ú = [ 4.965, 5.955]
ë è 100 øû

Yes, interval is entirely less than 6

9.24 [LO2]

é æ 2.6424 öù
ê42.95± 2 ç ÷ú = [ 42.295, 43.605]
ë è 65 øû

Yes, because interval is entirely greater than 42.

9.25 [LO3]

The margin of error refers to the error of our sample mean as an estimate of the population
mean, due to sampling variability.

9.26 [LO3]

We mean that the sample size will be sufficient for us to identify a confidence interval of a
particular width.

9.27 [LO3]

Because  is unknown and must be estimated by s obtained from a preliminary sample.

9.28 [LO3]

z  
2
n= /2 
 B 

æ 1.96 (10) ö
2

n =ç ÷ = 384.16
a. è 1 ø
round up to 385 units

é æ s öù é æ 10 öù
b. ê x ±1.96 ç ÷ú = ê295 ±1.96 ç ÷ú = 295 ±.999 = [294, 296]
ë è n øû ë è 385 øû

margin of error = 1
9.29 [LO3]

æ 1.96(32.83) ö
2

a. n =ç ÷ = 259 companies
è 4 ø

æ 2.575(32.83) ö
2

b. n =ç ÷ = 447 companies
è 4 ø
9.30 [LO3]

æ 2.575(.66) ö
2

a. n =ç ÷ =1806 buyers
è .04 ø

æ 3(.66) ö
2

b. n =ç ÷ =1569 buyers
è .05 ø
9.31 [LO3]

æ 2.776(19.6469) ö
2

a. n =ç ÷ = 47 trial runs
è 8 ø

æ 4.604(19.6469) ö
2

b. n =ç ÷ = 328 trial runs

è 5 ø
9.32 [LO3]

æ 2.777(3.54) ö
2

n =ç ÷ = 42.95 = 43
è 1.5 ø
It would not be possible to assemble this sample, given that there are only 8 of these stores in
Canada.

9.33 [LO3]
2
 2.145(1.026) 
n=  = 54
 .3 
9.34 [LO4]

a. the proportion of population units that fall in a category of interest

b. p = population proportion, pˆ = sample proportion

c. it refers to the margin of error in a 95% confidence interval, the  percentage around p̂ .
9.35 [LO4]

a. p = .5

b. p = .3

c. p = .8

9.36 [LO4]
a. No; (np) and n(1-p) are not both greater than 5:
np = (.1)(30) = 3
n(1-p) = 30(.9) = 27

b. Yes; (np) and n(1-p) are both greater than 5:

np = (.1)(100) = 10
n(1-p) = 100(.9) = 90

c. Yes; (np) and n(1-p) are both greater than 5:

np = (.5)(50) = 25
n(1-p) = 50(.5) = 25

d. Yes; (np) and n(1-p) are both greater than 5:

np = (.8)(400) = 320
n(1-p) = 400(.2) = 80

e. No; (np) and n(1-p) are not both greater than 5:

np = (.9)(30) = 27
n(1-p) = 30(.1) = 3

f. No; (np) and n(1-p) are not both greater than 5:

np = (.99)(200) = 198
n(1-p) = 200(.01) = 2

9.37 [LO4]

95% C.I.: z / 2 = 1.96

98% C.I.: z / 2 = 2.33
99% C.I.: z / 2 = 2.575

 (.4)(.6) 
a. .4  z / 2 
 100  ; [.304, .496], [.286, .514], [.274, .526]

 (.1)(.9) 
b. .1  z / 2 
 300  ; [.066, .134], [.060, .140], [.055, .145]

 (.9)(.1) 
c. .9  z / 2 
 100  ; [.841, .959], [.830, .970], [.823, .977]
  (.6)(.4) 
d. .6  z / 2 
 50  ; [.464, .736], [.439, .761], [.422, .778]

9.38 [LO4]

195
pˆ = = 0.557
350

(.557 )(.443)
CI : .557  1.96 = (.505,.609 )
350

At least 95% confident since interval is greater than .48.

9.39 [LO4]

 (.54146 )(.45854 ) 
a. .54146  1.96  = [.473,.610 ]
 205 

b. No, the interval extends below .5.

9.40 [LO4]

 (.41)(.59) 
a. .41  1.96  = [.3795,.4405 ]
 1000 

b. 37.95%
9.41 [LO4]

(.33)(.67)
a. .33± 2.575 = .33±.019 = [.311,.349]
4001
b.

1.96
(.7) (.3) = .0142
4001
margin of error is 1.42%
\it would be appropriate to refer to this proportion as being between 68.58% and 71.42%

c. The phrase “19 out of 20” alludes to a 95% confidence interval. We determined the
margin of error to be 1.42%, which is approximately equal to 1.5% (or “1.5 percentage
points”).

9.42 [LO4]

142
a. pˆ = = .355
400
 (.355)(.645) 
.355  1.96  = [.308,.402]
 400 

122
b. pˆ = = .244
500
 (.244)(.756) 
.244  1.96  = [.206,.282]
 500 

c. Yes, the U.K. 95% confidence interval is above the maximum value in the confidence
interval for the U.S.

9.43 [LO4]

 (.67)(.33) 
a. .67  2.575  = [.611,.729 ]
 418 

b. Yes, the interval is above .6.

9.44 [LO4]

(.20)(.80)
.20  1.96 = .20  .0166 = [.1834 ,.2166 ]
2221
Yes, entire interval is below .25

9.45 [LO4]
 152
p̂ = = 0.304
500

 (.304)(.696) 
a. .304  1.96  = [.264,.344]
 500 

b. Yes, the interval is above 0.20.

9.46 [LO4]

316
pˆ = = .79
400

 (.79)(.21) 
a. .79  2.575  = [.738,.842 ]
 400 

b. Yes, the interval is below .95.

9.47 [LO4]

10
a. pˆ = = .02
500
 (.02)(.98) 
.02  1.96  = [.0077 ,.0323]
 500 

27
b. pˆ = = .054
500
 (.054)(.946) 
.054  1.96  = [.034,.074]
 500 

c. Yes, the confidence interval is higher.

9.48 [LO5]

æ 2.575 ö
2

n = (.69)(.31)ç ÷ = 6303.514 » 6304

è .015 ø
9.49 [LO5]

Using p = .73754 and z.005 = 2.576

æ 2.576 ö
2

n = .73754 (1-.73754) ç ÷ =1427.24 » 1428

è .03 ø
9.50 [LO5]

Using p = .5 and z.025 = 1.96

 æ 1.96 ö
2

n = .5 (1-.5) ç ÷ = 9604
è .01 ø
9.51 [LO6]

a independent samples, normal distributions (note that unequal variances is NOT an

assumption…it can be done with equal variances)

b independent samples, normal distributions, equal variances

c dependent samples, normal distributions

9.52 [LO6]

The confidence interval gets wider as confidence goes up (i.e., 95% confidence interval is
wider than a 90% confidence interval)

9.53 [LO6]

x1 = 240, x2 = 210,s1 = 5,s2 = 6,n1 = 7,n2 = 7

(n1 − 1) s12 + (n2 − 1) s22 (7 − 1)(52 ) + (7 − 1)(6 2 ) 366
s 2p = = = = 30.5
n1 + n2 − 2 7+7−2 12
é æ 1 1 öù
ê(240 - 210) ± t.025 30 ç + ÷ ú = [30 ± 2.201(3.047247)] = [30 ± 6.432] = [23.568, 36.432]
êë è 7 6 ø úû

Yes, the entire interval is above 20.

s1 and s2 very close and n1 = n2

9.54 [LO6]

x1 = 240, x2 = 210,s1 = 5,s2 = 6,n1 = n2 = 7

s12 s22 25 36
sx − x = + = + = 2.952
1 2
n1 n2 7 7

æ s12 s22 ö
2
æ 25 36 ö
2
ç + ÷ ç + ÷
è n1 n2 ø è7 7ø 75.939
df = = =
æ s12 ö æ s22 ö æ 25 ö æ 36 ö
2 2 2 2
6.534
ç ÷ ç ÷ ç ÷ ç ÷
è n1 ø è n2 ø è7ø è7ø
+ +
n1 -1 n2 -1 6 6

= 11.6 so round down to 11 df.

95% CI = (240 − 210)  t.025 (2.952) = 30  (2.201)(2.952)

 = (23.503, 36.497)

9.55 [LO6]

 1 1 
a. (1.63 − .89)  t.025 .0745 +  
  12 12  
= [.74 ± 2.074(.11143)] = [.74 ± .231] = [.509, .971]
Yes, the interval is above .5.

b. .74  t.025 (.11143 ) = .74  2.086(.11143 )

= (.50756, .97244)

9.56 [LO6]

( n1 -1) s12 + ( n2 -1) s22 9 (1.3982) + 9 (1.8403)

2 2

s 2
p = = = 2.6708
n1 + n2 - 2 18
2.6708 2.6708
(121.916 -114.807) ±1.734 +
10 10
7.109 ±1.2673
[$5.84, $8.38]

9.57 [LO6]

x1 = 8.0838; x2 = 6.9660;s 2p = 0.27437

(8.0838 - 6.9660) ± 2.201 0.27437 0.27437

8
+
5
1.1178 ± 0.6572
[0.4606,1.7750]
9.58 [LO7]

 sd    5 
95%: d  t / 2  = 103 .5  2.228  = [103 .5  3.359 ] = [100 .141,106 .859 ] ; yes
 n   11 

  5 
99%: 103.5  3.169  = [103.5  4.777 ] = [98.723, 108.277 ] ; no
  11 

9.59 [LO7]

 sd    7 
d  t / 2  = 5  2.010   = [5  1.96] = [2.99,7.01] ; yes
 n   49 

9.60 [LO7]
  sd    6.1282588 
d  t.025  = − 7  2.262  = [−7  4.3836 ] = [−11.3836 , − 2.6164 ]
 n   10 
Minimum reduction: 2.6164

9.61 [LO8]

Sample sizes n1 and n2 are large

n1 p̂1, n1 (1- p̂1 ) , n2 p̂2 , and n2 (1- p̂2 ) must all be at least 5
independent random samples
9.62 [LO8]

800 950
pˆ1 = = .8, pˆ 2 = = .95
1000 1000
 pˆ 1 (1 − pˆ 1 ) pˆ 2 (1 − pˆ 2 )   .8(1 −.8) .95(1 −.95) 
( pˆ 1 − pˆ 2 )  z / 2 +  = (.8 −.95)  1.96 + 
 n1 n2   1000 1000 


= − .15  1.96 .0002075 
= [ −.15  1.96(.0144048603 )]
= [ −.15 .028 ] = [ −.178,− .122 ]

Yes, the entire interval is below zero.

9.63 [LO8]

142 122
pˆ 1 = =.355 and pˆ 2 = =.244
400 500

[(.355 – .244) ± 1.96(.03054)] = [.111 ± .0599] = [.0511, .1709]

Yes, the entire interval is above zero.

9.64 [LO8]

25 9
pˆ1 = =.17857 and pˆ 2 = =.15
140 60

 .17857 (1 −.17857 ) .15(1 −.15) 

( pˆ 1 − pˆ 2 )  1.96 +  = [.02857  1.96(.0563 )]
 140 60 
= [.02857 .1104 ]
= [ −.0818 ,.1390 ]; no

9.65 [LO8]

10 27
pˆ1 = = .02, pˆ 2 = = .054
500 500
 95% C.I. [–0.0573036, –0.0106964]; –.0107 smallest difference

9.66 [LO2]

  35.72 
a. 68.04  1.97  = [63.590 , 72.490 ]
  250 

  34.87 
b. 56.74  1.97  = [52.287 , 61.93]
  238 

c. Yes, interval for financial companies is below the lowest value in the confidence interval
for industrial companies.

9.67 [LO4, LO5]

é (.305)(.695) ù
a. ê.305 ±1.96 ú = [.263, .347]
ë 465 û

b. We can be 95% confident that the proportion is greater than 0.25, as the interval is
entirely above this value. Yes, auditors should understand proper graphing methods.

æ 1.96 ö
2

c. n = .305 (1-.305) ç ÷ » 905

è .03 ø
9.68 [LO2, LO3]

é æ 2.34 öù
a. ê19.27 ±1.990 ç ÷ú = [18.75, 19.79]
ë è 81 øû

Yes, we can be 95% confident that the mean stopping distance is less than 20, as the
highest value in the CI is less than 20.

æ 1.990(2.34) ö
2

b. n =ç ÷ = 86.74 = 87
è .5 ø

9.69 [LO2, LO4]

150
a. pˆ = = .746
201
 pˆ (1 – pˆ )   (.746)(.254 ) 
 pˆ  z  / 2  = .746  1.96  = [.686, .806]
 n   201 
No, the proportion could be below .7.

  s    6.11 
b.  x  1.98  = 4.88  1.98  = [ 3.892 , 5.868 ]
  n     150 
Yes, the interval is above 3.
9.70 [LO2]

  3.7432 
a. 26.22  2.01  = [25.1562 , 27.2838 ]
  50 

b. Yes, not much more than 25

9.71 [LO2]

  1.64 
a. 2.73  2.977   = [1.469 %, 3.991 %]
  15 
Yes, the interval is below 5%.

  25.37 
b. 34.76  2.977   = [15.259 %, 54.261 %]
  15 
This interval is wide because s is large and n is small; increase the sample size.

9.72 [LO2]

 s 
95% C.I.=  x  2.01 
 n
Fixed annuities: [7.685%, 7.975%]
Domestic large-cap stocks: [9.108%, 17.732%]
Domestic mid-cap stocks: [9.788%, 20.272%]
Domestic small-cap stocks: [16.327%, 28.693%]

9.73 [LO2]

 41 
538  2.032  = [523.92, 552.08]
 35 

9.74 [LO4]

(.64)(.36)
.64  1.96 = .64  .02975 = [.61025 ,.66975 ]
1000

9.75 [LO2]

é æ 1.786 öù
a. ê50.783± 2.201ç ÷ú = [49.648, 51.918]
ë è 12 øû

b. No, since 50 is in the interval.

9.76 [LO8]

b.
 p̂1 (1- p̂1 ) p̂2 (1- p̂2 )
( p̂1 - p̂2 ) ± za 2 +
n1 n2
.7957 (1-.7957) .7887 (1-.7887)
(.7957 -.7887) ± 2.575 +
5, 916,840 6,164, 745
.007 ±.000601
(.006399,.007601) or .6399% to .7601%
c.

p̂1 (1- p̂1 ) p̂2 (1- p̂2 )

( p̂1 - p̂2 ) ± za 2 +
n1 n2
.1226 (1-.1226) .2261(1-.2261)
(.1226 -.2261) ± 2.575 +
911, 900 5, 381, 210
.1035 ±.000999
(.1025,.1045) or 10.25% to 10.45%
d.

p̂1 (1- p̂1 ) p̂2 (1- p̂2 )

( p̂1 - p̂2 ) ± za 2 +
n1 n2
.1284 (1-.1284) .2295 (1-.2295)
(.1284 -.2295) ± 2.575 +
1, 003, 545 5,807, 550
.1011±.000970
(.1001,.1021) or 10.01% to 10.21%