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March 29, 2017

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An auditor wants to estimate what proportion of a bank’s commercial loan files are incomplete. The auditor wants to be within 10% of the true proportion when using a 95% confidence level. How many files must the auditor sample? No estimate of the proportion is available, so use 0.5 for the population proportion.

  • Statistics - ,

    Here is one formula you might use for this problem:

    n = [(z-value)^2 * p * q]/E^2

    With your data:
    n = [(1.96)^2 * .5 * .5]/.10^2

    I'll let you finish the calculation (round to the next highest whole number).

    Note: n = sample size needed; .5 for best estimate of the population proportion; .5 for q, which is (1 - p). E = maximum error, which is 10% or .10 from the problem. Z-value is found using a z-table (for 95%, the value is 1.96).

    I hope this helps.

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