CFA Practice Question

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CFA Practice Question

I collect a random sample of size n from a population with standard deviation σ, and from the data collected I compute a 95% confidence interval for the mean of the population. Which of the following would produce a new confidence interval with smaller width (smaller margin of error) based on these sample data?

I. Increase σ.
II. Use a lower confidence level.
III. Use a smaller sample size.
Correct Answer: II only

The margin of error of a confidence interval is reduced by using a lower level of confidence or increasing the sample size.

User Contributed Comments 4

User Comment
vincenthuang X+-Z*S/n^.5
so increase n or decrease s will reduce interval
Mikael Correct. Confidence level = 1 - level of significance.
cslau83 level of confidence = level of significance?
johntan1979 Read the notes, cslau83
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