- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 9. Common Probability Distributions
- Subject 8. The Standard Normal Distribution

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**CFA Practice Question**

True or False? If false, correct the statement.

A confidence interval estimate for a parameter is used to eliminate the element of chance from estimation.

Correct Answer: False

The confidence interval is used to acknowledge the element of chance in estimation.

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**User Contributed Comments**
4

User |
Comment |
---|---|

surob |
Can someone explain what it means? Didn't quite understand. Thx |

bobert |
I think it means that the because it is an estimate, it is acknowledging that there is uncertainty or chance in the estimation. Analogy: A person robs a store that you are at. The police come to you for a statement and ask how confident you feel about picking the man out of a lineup. You say 95%. You are not saying that you are 100% sure because there is a chance that you won't be able to. |

epizi |
I think chance is about probability of the right guess.If you are given a reasonable range to choose, chance of missing(getting) the right guess is reduced(increased) |

Shalva |
You cannot eliminate uncertainty simply by calculating the confidence interval. |