Question

A study showed that 14 of 180 publicly traded business services companies failed a test for compliance with Sarbanes-Oxley requirements for financial records and fraud protection. Assuming that these are a random sample of all publicly traded companies, construct a 95% confidence interval for the overall noncompliance proportion. (Round your answers to 4 decimal places.)

Answer 1

Answer:

The 95% confidence interval for the overall noncompliance proportion is (0.0387, 0.1169).

Step-by-step explanation:

In a sample with a number n of people surveyed with a probability of a success of $\pi$, and a confidence level of $1-\alpha$, we have the following confidence interval of proportions.

$\pi \pm z\sqrt{\frac{\pi(1-\pi)}{n}}$

In which

z is the zscore that has a pvalue of $1 - \frac{\alpha}{2}$.

For this problem, we have that:

$n = 180, \pi = \frac{14}{180} = 0.0778$

95% confidence level

So $\alpha = 0.05$, z is the value of Z that has a pvalue of $1 - \frac{0.05}{2} = 0.975$, so $Z = 1.96$.

The lower limit of this interval is:

$\pi - z\sqrt{\frac{\pi(1-\pi)}{n}} = 0.0778 - 1.96\sqrt{\frac{0.0778*0.9222}{180}} = 0.0387$

The upper limit of this interval is:

$\pi + z\sqrt{\frac{\pi(1-\pi)}{n}} = 0.0778 + 1.96\sqrt{\frac{0.0778*0.9222}{180}} = 0.1169$

The 95% confidence interval for the overall noncompliance proportion is (0.0387, 0.1169).