CFA Practice Question

There are 434 practice questions for this study session.

CFA Practice Question

Calculate an 80% confidence interval for a population mean. You have a sample of 21, a sample mean of -25%, and a sample standard deviation of 10%. The sample appears to be approximately normally distributed.
A. [-26%, -24%]
B. [-28%, -22%]
C. [-27%, -23%]
Explanation: Based on the data given, we should use the t-distribution. The critical value will be based at t_(0.10, 20) and is 1.325. Our confidence interval will then be [-25% - 1.325*(10%)/(210.5), -25% + 1.325*(10%)/(210.5)] = [-28%, -22%].

User Contributed Comments 11

User Comment
aallali We use n instead of n-1 in the standard error formula, but the degrees of freedom is n - 1.
markhuang because it's a t-test.
panvino I think aallali is right - the standard error formula is s/(n)^1/2,even if it is a t test. For degrees of freedom we use n-1.
zed888 how are we supposed to memorize the t values - especially at the 80% confidence level?
dipu617 How did they get 1.325?
AnalystBklyn t values will be provided on the test, zed
Shaan23 I memorized all the t values. It was fun.
GBolt93 Pretty sure neither t nor z values are provided on the test. However you can calculate the standard error as .021 and have to know the critical for 80% will be greater than 1 therefore b is the only logical answer.
John_Vesce Pretty sure the tables are provided
1a2a The tables are not provided and so questions like this one are dumb and a waste of time. I would know because I've failed this exam 2 times in a row and with my luck it'll probably be #3 coming up this December.
gbertini Why are we using a t distribution rather than a z distribution in this case?
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