CFA Level 1 Confidence Interval: Calculation and Interpretation

Calculating 95% Confidence Interval for Population Mean

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A sample of size 100 is drawn from a population. The sample mean equals 35.2 and the variance of the sample equals 47.8. The 95% confidence interval for the population mean is given by:

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D

If z is the z-value corresponding to the specified confidence level, the sample mean is M and the standard deviation is D in a sample size N, the confidence interval is specified as [M - z*D/sqrt(N), M + z*D/sqrt(N)]. In the present case, for the 95% confidence interval, z = 1.96. The sample standard deviation equals sqrt

(47.8) = 6.91. Therefore, the confidence interval equals [35.2 - 1.96*6.91/sqrt(100), 35.2 - 1.96*6.91/sqrt(100)] = [33.85, 36.56]