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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?

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.

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**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 |