New Mexico National Bank New Mexico National Bank (NMNB) operates branches in 23
ID: 434067 • Letter: N
Question
New Mexico National Bank
New Mexico National Bank (NMNB) operates branches in 23 cities and towns through out the state of New Mexico. The bank offers a complete range of financial services, including Visa and MasterCard credit cards. New Mexico National Bank (NMNB) has 53,400 people in the state using its credit cards. Based on their original applications, the bank has certain information about these individuals, including name, address, zip code, telephone number, income, education, and assets. NMNB is interesting in determining whether a relationship exists between the volume of purchases charged on credit cards and the demographic characteristics of the individual cardholders. For example, are individuals in certain parts of the stet more or less likely to be heavy users of the card? Is there a relationship between the person's level of education and card usage? The data can be used to more effectively target offering sent through the mail if significant relationships are found. Paul Bruney, research director for NMNB, is in the process of developing a design for the research. If you were Paul Bruney, how would you answer the following questions?
Questions:
4. Would it make sense to use a stratified sample in the situation? Why or why not? How would you approach the process of developing a stratified sample from the sampling frame you chose?
Explanation / Answer
4. Stratified random sampling divides the population into smaller subsets. These smaller subsets are called strata. Sampling analysis can be done on these strata to find the demographic division pattern.
In the given case, NMNB can make use of the stratified sampling technique as the population data is quite large and dividing the same into smaller strata on the basis of similar characteristics can give a better structure to the analysis. The approach of stratified sampling ensures that all the subsets of the group get adequate representation in the sample analysis.
From the given sample, smaller subgroups can be extracted based on income level – high income class, middle income class and low income class. Based on this division, further analysis of the same can be done. Similarly, strata can be formed on the basis of education or location.