Direct mail advertisers send solicitations (a.k.a. junk mail ) to thousands of potential customers in the hope that some will buy the company s product. The acceptance rate is usually quite low. Suppose a company wants to test the response to a new flyer, and sends it to 1000 people randomly selected from their mailing list of over 200,000 people. They get orders from 123 of the recipients.
a) Create a 90% confidence interval for the percentage of people the company contacts who may buy something.
b) Explain what this interval means.
c) Explain what 90% confidence means.
d) The company must decide whether to now do a mass mailing. The mailing won't be cost-effective unless it produces at least a 5% return. What does your confidence interval suggest? Explain.