According to a study, 72% of financial institutions use churn rate (attrition) t

Question

According to a study, 72% of financial institutions use churn rate (attrition) to gauge the effectiveness of their marketing efforts. Complete parts (a) and (b). a. If you conduct a follow-up study to estimate the population proportion of financial institutions that use churn rate to gauge the effectiveness of their marketing efforts, would you use a x of 0.72 or 0.50 in the sample size formula? A. Use x = 0.72 because this value is an educated estimate of x. B. Use x = 0.50 because this value is an educated estimate of x. C. Use x = 0.72 because this value will produce the greater sample size. D. Use x = 0.50 because this value will produce the greater sample size.

Explanation / Answer

As we have been given an educated estimate of 0.72 from a previous study we would be using that point estimate of proportion to estimate the confidence interval for the true population proportion. therefore A is the correct answer.

The value of point estimate is taken 0.5 only when we dont have a prior proportion estimate and when we want to have a more conservative estimate .

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