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?
II. Use a lower confidence level.
III. Use a smaller sample size.
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 |