New Mexico National Bank New Mexico National Bank (NMNB) operates branches in 23
ID: 434077 • 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?
6. Which of the three probability sampling methods just mentioned would you choose for this study? Why would you choose that option?
Explanation / Answer
6. Probability sampling method is the technique in which theory of probability forms the basis for selecting sample from a large population.
Stratified random sampling is a type of probability sampling technique, which 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.