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Interval Estimate

This document discusses interval estimates of population means when the population standard deviation is known. It defines a confidence interval as a range of values used to estimate an unknown parameter, with the confidence level representing the probability the interval contains the true parameter value. Common confidence levels like 90%, 95%, and 99% are associated with specific critical z-values. The margin of error and formula for calculating a confidence interval when the population standard deviation is known are also provided, along with an example calculating a 95% confidence interval for students' daily allowance.

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Jeff Lacasandile
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63 views3 pages

Interval Estimate

This document discusses interval estimates of population means when the population standard deviation is known. It defines a confidence interval as a range of values used to estimate an unknown parameter, with the confidence level representing the probability the interval contains the true parameter value. Common confidence levels like 90%, 95%, and 99% are associated with specific critical z-values. The margin of error and formula for calculating a confidence interval when the population standard deviation is known are also provided, along with an example calculating a 95% confidence interval for students' daily allowance.

Uploaded by

Jeff Lacasandile
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Statistics and Probability

Interval Estimate of Population Mean when σ is known

An Interval estimate, called a confidence interval is a range of values used to estimate a


parameter. This estimate may or may not contain the true parameter value.

The confidence level of an interval estimate of a parameter is the probability that the interval
estimate contains the parameter. It describes what percentage of intervals from many different
samples contain the unknown population parameter.

The critical values, also known as confidence coefficients, are the z-values that is used in
describing the characteristics of a target population. When σ is known, z-values are used. Note
that these values are constant at those given confidence levels.

At 90% confidence, z=± 1.65 is used.

At 95% confidence, z=± 1.96 is used.

At 99% confidence, z=± 2.58 is used.

The margin of error is the maximum difference between the observed sample mean and the true
value of the population mean. It is expressed as:

E=z σ
2
( )
σ
√n
Note that we only use this formula for the margin of error if we know the value ofσ .

The interval estimate is expressed as:

X −E< μ< X+ E

Example:

1. A random sample of 50 students was asked about how much their allowance is every
day. The average allowance of the sample is found to be P400 and the population
standard deviation is P150. Find the interval estimate of the population mean a using
95% confidence level.
Solution:

Step 1: Determine the variables in the given problem.

The sample mean is X =400 ;

The population standard deviation is σ =150;

The sample size is n=50;

The confidence level is 95%.

Step 2: Determine the critical value to be used.

Since the confidence level is 95%, we will use z=± 1.65.

Step 3: Sove for the margin of error.

We will use the formula E=z σ


2
( √σn ) ;

E=z σ
2
( √σn )
¿ 1.96
( )
150
√ 50
¿ 41.578

Step 4: Determine the confidence interval.

The confidence interval is X −E< μ< X+ E.

The X −E part is the lower limit and X + E is the upper limit.

Let’s solve for the lower limit of the interval.

X −E=400−41.578

¿ 358.422

Now, let’s solve for the upper limit of the interval.

X + E=400+41.578

¿ 441.578

Therefore, the confidence interval is 358.422< μ< 441.578


What does this interval mean, exactly? The confidence interval says that we are 95% sure that
the population mean is between 358.422 and 441.478. This method is more accurate than the
point estimate since we are dealing with a range of values, than with just a single value.

So, putting this concept in the context of the word problem, we are saying that we are 95% sure
that the average

Allowance of the students is between P358.42 and P441.48. We rounded it off in two decimal
places since the problem deals with money.

Reminder:

Having 99% confidence level is not necessarily better than having a 95% confidence level. In
99% confidence level, we are 99% sure that the population mean is in that interval, but the
tendency is that we will have a longer interval compared to a 95% confidence level. If we have a
longer interval, it is harder to estimate the actual population mean since we are dealing with
more numbers. In 95% confidence level, we are only 95% sure, but the interval is much shorter
and more precise.

Main point:

The interval estimate tells us a range of values where the population mean may be located. At
95% confidence level, we are 95% sure that the population is inside that interval estimate. The
same thing can be said for 90% confidence level and 99% confidence level.

At 99% confidence level, we become more certain but we are increasing the length of the
interval. At 95% confidence level, we become less sure but the interval becomes more precise
because we shorten the interval.

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