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Confidence Intervals

in Statistics with
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Excel 2010

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75 Problems
&
in

Detailed Solutions

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An I
deal
Supp
Stat
leme
istic
nt fo
s
r St
Inst
uden
ruct
ts &
ors

Kilem L. Gwet, Ph.D.


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Printed Books by Kilem L. Gwet

I The Practical Guide to Statistics: Basic Concepts, Methods and Meaning.


Application With MS Excel, R, and OpenOffice Calc
I HANDBOOK OF INTER-RATER RELIABILITY (Second Edition): The Definitive Guide to Measuring the Extent of Agreement Among Multiple
Raters

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I INTER-RATER RELIABILITY USING SAS: A Practical Guide for Nominal, Ordinal, and Interval Data

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CONFIDENCE INTERVALS
IN STATISTICS:
100 Problems & Solutions

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Excel 2010-Assisted Solutions

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c 2011 by Kilem Li Gwet, Ph.D. All rights reserved.


Copyright
Published by Advanced Analytics, LLC

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A single copy of this document may be printed and the printed copy be shared
with other interested parties. However, this document is NOT to be transmitted in
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Analytics, LLC at the following address :
Advanced Analytics, LLC
PO BOX 2696
Gaithersburg, MD 20886-2696
e-mail: info@advancedanalyticsllc.com

This publication is designed to provide accurate and authoritative information in


regard of the subject matter covered. However, it is sold with the understanding
that the publisher assumes no responsibility for errors, inaccuracies or omissions.
The publisher is not engaged in rendering any professional services. A competent
professional person should be sought for expert assistance.
Publishers Cataloguing in Publication Data :

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Gwet, Kilem Li
Confidence Intervals in Statistics: 75 Problems and Solutions
A Practical Self-Study Guide for Students and Professionals/ By Kilem Li Gwet
p. cm.
1. Biostatistics
2. Statistical Methods
3. Statistics - Study - Learning. I. Title.

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Contents

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2.  Confidence Interval for a Population Mean . . . . . . . . 3

 
1.  Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.1 Population Standard Deviation () is Known . . . . . . . . 5


2.2 Population Standard Deviation () is Unknown . . . . 14
2.3 Sample Size Determination () is Unknown . . . . . . . . 59

 
3.  Confidence Interval for a Population Proportion 71

3.1 Confidence Interval Calculation . . . . . . . . . . . . . . . . . . . . 74


3.2 Sample Size Determination . . . . . . . . . . . . . . . . . . . . . . . . 91

 
4.  Excels Analysis ToolPak . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

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4.1 Installing the Analysis ToolPak for Excel 2010 . . . . . 99


4.2 Analyzing Raw Data with the Descriptive Statistics
Module. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102

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Introduction

The confidence interval is one of the many techniques used in statistical


inference for projecting findings from a limited amount of data to the more
general population of interest. It represents a range of values expected to
include an unknown quantity at the specified confidence level. Claiming for
example that the percent of Americans who support their presidents foreign
policy is 45% 3% with 95% certainty, means two things:
(i) That 45% is our best guess of the percent of Americans supporting the
presidents foreign policy based on the limited number of persons who
participated in our study. 45% is called the Point Estimate of the true
population percent of Americans supporting the Presidents foreign policy.
(ii) That our approximation is subject to an error margin of 3% that stems
from the fact that our study did not cover the entire population of Americans that constitutes our primary interest. Moreover, we can claim with
95% certainty that the values ranging from 42% through 48% contain
the true population percentage that we would have obtained had we
surveyed the entire US population. 95% is called the Confidence Level.

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The US presidents foreign policy example illustrates the used of confidence


intervals for population proportions or percentages. However, confidence intervals are also often used for population means of quantitative or measurement
variables such as income, height or weight. This booklet features numerous
carefully-selected exercises, all related to the construction of confidence intervals, and all accompanied with detailed and commented solutions. Readers
interested in a comprehensive and student-friendly exposition of the notion of
confidence interval, could find a detailed and vivid account in Gwet (2011)1 .
1

K. Gwet (2011), The Practical Guide to Statistics: Applications with Excel, R, and Calc,
Advanced Analytics, LLC

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-2-

Chapter 1: Introduction

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This booklet contains a series of 75 exercises with solutions. The exercises


in chapter 2 aim at showing how confidence intervals for the population mean
of a measurement variable can be constructed, while those of chapter 3 focus
on the construction of confidence intervals for population proportions. While
many exercises illustrate the techniques for constructing confidence intervals,
the reader will also find numerous exercises on the sample size calculation.
The sample size calculation exercises illustrate the techniques for determining
the number of units required in the sample to ensure a specified error margin,
or a specified interval length.
Occasionally, you will need to construct confidence intervals or calculate the
required sample sizes based on a series of raw numbers representing the sample
data. Summary statistics will have to be generated before you can construct
the confidence intervals, or calculate the sample sizes. My recommendation is
to use the Descriptive Statistics module of the Excel 2010 Analysis ToolPak
to produce these summary statistics.
The Excel Analysis ToolPak is an Excel Add-In that comes with Microsoft
Office, and that must be activated before it can be used. Chapter 4 provides
detailed instructions for activating the ToolPak and for using the Descriptive
Statistics module.
If you have comments or questions, do not hesitate to contact the author
using one of the following 2 methods:
E-Mail: info@advancedanalyticsllc.com

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Mail: Advanced Analytics, LLC


PO BOX 2696
Gaithersburg, MD 20886-2696

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Confidence Intervals for a


Population Mean

Many statistics textbooks present the material on confidence intervals for


means by separately treating the situation when the population standard deviation is known, and the situation when it is unknown. I find it more
practical to separately present the situation when the sample size n is large1 ,
and the situation when it is small.
Whether the sample size is large or small, the construction of a confidence
interval for a population mean relies heavily upon the sampling distribution
of the sample mean x. The probability distribution of the sample mean must be
known (at least approximately) for you to be able to construct the confidence
interval.
Large Sample Size (i.e. n 30)

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Let s be the sample standard deviation. If the population standard deviation


is available, then use it in place of the sample standard deviation (Note
that this interchangeability applies only when the sample size n is large). The
confidence interval of the population mean at a pre-specified confidence level
is given by:


s
s

x z/2 ; x + z/2 , if is not available (a),


n
n


C.I() =
(2.1)

x z/2 ; x + z/2 , if is available


(b),
n
n

where = 1 (Confidence Level), and z/2 is the 100 (1 /2)th percentile


of the standard Normal distribution, that is calculated with Excel 2010 as
1

For all practical purposes, a sample size n is considered large when it equals or exceeds
30, and is small otherwise

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-4-

Chapter 2: Confidence Intervals for a Population Mean

follows:
z/2 = NORM.S.INV(1-/2)

(2.2)

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C.I() = x z/2 , or C.I() = x z/2


n
n

The confidence intervals of equation 2.1, are sometimes presented in the form,

Small Sample Size (i.e. n < 30)

When the size n of your sample is small (i.e. the number of sample elements is
below 30), then you must assume that the input observations follow the Normal distribution (at least approximately)2 , and separately treat the situations
where the population standard deviation is known and where it is unknown.
(i) Known Population Standard Deviation

When the population standard deviation is known, then the confidence


interval associated with the population mean , is given by:


C.I() =

x z/2 ; x + z/2 ,
n
n

(2.3)

where = (Confidence Interval), and z/2 is the 100(1/2)th percentile of the standard Normal distribution, which is computed with Excel
2010 as shown in equation 2.2.

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(ii) Unknown Population Standard Deviation

When the population standard deviation is unknown, then the confidence


interval associated with the population mean , at a given confidence
level is given by:

C.I() =


s
s
x t/2,n1 ; x + t/2,n1 ,
n
n

(2.4)

Gwet (2011), in the book The Practical Guide to Statistics: Applications with Excel,
R, and Calc discusses the situation where this assumption cannot be made. However, all
exercises in this section are based on the assumption of Normality or approximate Normality

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2.1

Population Standard Deviation () is Known

-5-

where = 1 (Confidence Level), and t/2,n1 is the 100 (1 /2)th


percentile of the Students t-distribution with n 1 degrees of freedom.
This quantity is calculated using Excel 2010 as follows:

(2.5)

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t/2,n1 = T.INV(1 /2)


The Finite-Population Correction Factor

Occasionally in practice, you may have to select a sample from a well-defined


and specific finite population. The sample may well represent a sizeable portion
of the entire population. In this case, the standard error of the sample mean
calculated as the ratio of the standard deviation to the square root of the
sample size, will overestimate the true standard error of the mean. The
solution to this problem is to multiply the classical standard error by the
finite-population correction (FPC) factor defined as follows:
r
N n
,
(2.6)
FPC =
N 1
where N is the population size, and n the sample size.

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The rule of thumb for deciding whether to use or not use the FPC is to
use it whenever the sampling fraction that represents the ratio n/N of the
sample size to the population size is smaller than
using the FPC

0.05. When
is deemed appropriate, all ratios of the
form / n or s/
n must be replaced
with their adjusted versions FPC / n and FPC s/ n. The corresponding
confidence intervals must be computed accordingly.

2.1

Population Standard Deviation () is Known

Exercise 2.1 
A sample of 49 observations is taken from a normal population with
a standard deviation of 10. The sample mean is 55. Determine the
99 percent confidence interval for the population mean.

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-6-

Chapter 2: Confidence Intervals for a Population Mean

Solution
is unknown a
=10
n = 49
x = 55
0.99

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Population Mean:
Population standard deviation:
Sample Size :
Sample Mean :
Confidence Level:

Table 2.1 : Input information

a
This quantity has to be unknown, otherwise there would not be any need to develop a
confidence interval for a known quantity.

Since the probability distribution of the raw data is normal, so is the probability distribution of the sample mean x. Equation 2.1(b) will be used because
of the large sample size that exceeds 30, and the availability of the population
standard deviation .
Of all the elements needed to construct the confidence interval (c.f. equation
2.1(b)), only z/2 is yet to be obtained. It follows from the confidence level
0.99 that = 1 0.99 = 0.01 and /2 = 0.005. Consequently, z0.005 represents
the 99.5th percentile3 of the Normal distribution needed to construct the 99th
confidence interval. It is obtained with Excel 2010 as shown in Figure 2.1.
The two confidence bounds of the interval are given by,

Lower Bound = x z/2 / n = 55 2.576 10/ 49 = 51.32,

Upper Bound = x z/2 / n = 55 + 2.576 10/ 49 = 58.68.

CI()=(51.32 ;58.68).

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The 99% confidence interval of the population mean is,

It is generally recommended to round the lower bound down and the upper
bound up. That is, if for example the lower bound is 13.268, and you want to
display only 2 digits after the decimal point, then you should present 13.26 (and
not 13.27). On the other hand, an upper bound of 13.262 would be rounded
up to 13.27 (and not 13.26). The rationale is to ensure the validity of the
confidence level with respect to the final interval.
3

Note that 99.5 = 100 (1 /2) is the recommended percentile in equation 2.1.

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Population Standard Deviation () is Known

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2.1

Figure 2.1. Calculating the 99.5th percentile of the Normal distribution with
Excel 2010


Exercise 2.2 
A sample of 81 observations is taken from a normal population with
a standard deviation of 5. The sample mean is 40. Determine the 95
percent confidence interval for the population mean.

Solution

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Table 2.2 : Input information

Population Mean:
Population standard deviation:
Sample Size :
Sample Mean :
Confidence Level :

is unknown a
=5
n = 81
x = 40
0.95

This quantity has to be unknown, otherwise there would not be any need to develop a
confidence interval for a known quantity.

Since the probability distribution of the raw data is normal, so is the probability distribution of the sample mean x. Equation 2.1(b) will be used because
of the large sample size that exceeds 30, and the availability of the population
standard deviation .
It follows from the confidence level 0.95 that = 1 0.95 = 0.05 and
/2 = 0.025. Consequently, z0.025 represents the 97.5th percentile of the Normal

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-8-

Chapter 2: Confidence Intervals for a Population Mean

distribution needed to construct the 95th confidence interval. It is obtained


with Excel 2010 as 1.96 =NORM.S.INV(1-0.05/2) .

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The two confidence bounds of the interval are given by,

Lower Bound = x z/2 / n = 40 1.96 5/ 40 = 38.90,

Upper Bound = x z/2 / n = 40 + 1.96 5/ 40 = 41.90.


The 95% confidence interval of the population mean is,
CI()=(38.9 ;41.9).

Exercise 2.3 
A sample of 10 observations is selected from a normal population
for which the population standard deviation is known to be 5. The
sample mean is 20.
a. Determine the standard error of the mean.

b. Explain why we can use formula (2.3) to determine the 95


percent confidence interval even though the sample is less than
30.

c. Determine the 95 percent confidence interval for the population


mean.

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Solution

Table 2.3 : Input information


Population Mean:
Population standard deviation:
Sample Size :
Sample Mean :

is unknown a
=5
n = 10
x = 20

This quantity has to be unknown, otherwise there would not be any need to develop a
confidence interval for a known quantity.

(a) Standard Error of the Mean: s.e(x)

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2.1

Population Standard Deviation () is Known

-9-

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The s.e. of the mean is defined as s.e(x) = / n = 5/ 10 = 1.581.


(b) Although the sample size n is smaller than 30, we can use formula 2.3
because the population is normal and the population standard deviation
is known to be 5.
(c) 95% confidence interval for

Confidence level=1
= 0.95. The lower bound is LB = xz0.025 /n =

20 1.96 5/ 10 = 16.9. The upper bound is LB = x + z0.025 / n =


20 1.96 5/ 10 = 23.1. The 95% confidence interval of the population
mean is,
CI()=(16.9 ;23.1).

Exercise 2.4 
A research firm conducted a survey to determine the mean amount
steady smokers spend on cigarettes during a week. They found the
distribution of amounts spent per week followed the normal distribution with a standard deviation of $5. A sample of 49 steady smokers
revealed that x = $20.
a. What is the point estimate of the population mean ? Explain
what it indicates.
b. Using the 95 percent level of confidence, determine the confidence interval for . Explain what it indicates.

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Solution

Table 2.4 : Input information


Population Mean:
Distribution of data:
Population standard deviation:
Sample Size :
Sample Mean :

is unknown
Normal
=$5
n = 49
x = $20

(a) The point estimate of the population mean is the sample mean x = $20.
It represent our best guess of the magnitude of the actual and unknown
population mean .

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2.2

- 17 -

Population Standard Deviation () is Unknown

2.5 as follows:
t = t/2,n1 = t0.05,15 = T.IN V (1 0.05, 15) = 1.75.

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Note that = 1 0.90 = 0.10, and 0.05 = /2. For a confidence level
of 90%, the value of t represents the 95th percentile of the t distribution
with n 1 = 16 1 = 15 degrees of freedom.

(d) We will develop the 90% confidence interval for the population mean
using expression 2.4. The lower bound LB and the upper bound UB of
the confidence interval ar obtained as follows:
s
20
LB = x t0.05 = 60 1.75 = 51.2,
n
15
s
20
UB = x + t0.05 = 60 + 1.75 = 68.8.
n
15

The 90% confidence interval of the population mean number of eggs per
chicken is,
CI()=(51.2 ;68.8),

(e) Yes, it would be reasonable to conclude that the population mean is 63


pounds, because 63 falls inside the 90% confidence interval. This interval
is supposed to contain the true population mean with 90% certainty.


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Exercise 2.11 
Merrill Lynch Securities and Health Care Retirement, Inc., are two
large employers in downtown Toledo, Ohio. They are considering
jointly offering child care for their employees. As a part of the feasibility study, they wish to estimate the mean weekly child-care cost of
their employees. A sample of 10 employees who use child care reveals
the following amounts spent last week.
$107 $92 $97

$95

$105

$101 $91 $99

$95

$104

Develop a 90 percent confidence interval for the population mean.


Interpret the result.

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- 18 -

Chapter 2: Confidence Intervals for a Population Mean

Solution

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The population mean is =the mean weekly child-care cost of the population
of Merrill Lynch Securities and Health Care Retirement, Inc. employees. It is
unknown and must be estimated with a 90% confidence interval.
Capture the 10 data points of this exercise in Excel. This data may be
organized either vertically or horizontally. Following the directives of section
4.2 of chapter 4, use the Descriptive Statistics module of the Excel 2010s
Analysis ToolPak to produce Table 2.10 below (make sure to specify the correct
confidence level of 90%).
Table 2.10 : Output of the Descriptive Statistics Module
Mean
Standard Error
Median
Mode
Standard Deviation
Sample Variance
Kurtosis
Skewness
Range
Minimum
Maximum
Sum
Count
Confidence Level(90.0%)



98.6



1.752
98
95
5.542
30.711
-1.304
0.165
16
91
107
986
 10
3.212 

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The second column of the last raw (entitled Confidence Level(90.0%)),


contains the error margin4 E = 3.212 associated with the sample mean x =
98.6. These two numbers should be used to obtain the 90% confidence interval
as follows:
Lower Bound = x E = 98.6 3.212 = 95.388,
Upper Bound = x + E = 98.6 + 3.212 = 101.812.

The error margin is expressed as E = t/2,n1 s/ n

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2.2

Population Standard Deviation () is Unknown

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The confidence interval is,

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C.I()=(95.38 ;101.82).

Interpretation

Although the feasibility study estimated the mean weekly child-care cost of
the employees to be about $98.6 based on a small sample of 10 employees, the
actual value of that mean is between $95.38 and $101.82 with 90% certainty,
as suggested by the confidence interval.

Exercise 2.12 

The Greater Pittsburgh Area Chamber of Commerce wants to estimate the mean time workers who are employed in the downtown area
spend getting to work. A sample of 15 workers reveals the following
number of minutes spent traveling.
29 38 38
40 37 37

33
42

38
30

21 45 34
29 35

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Develop a 98 percent confidence interval for the population mean.


Interpret the result.

Solution

The population mean is =the mean commute time of workers to work. It is


unknown and must be estimated with a 98% confidence interval.
Capture the 15 data points of this exercise in Excel. This data may be
organized either vertically or horizontally. Using the directives of section 4.2
of chapter 4, use the Descriptive Statistics module of the Excel 2010s Analysis ToolPak to produce Table 2.11 below (make sure to specify the correct
confidence level of 98%).

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2.3

- 59 -

Sample Size Determination

2.3

Sample Size Determination

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The narrower the confidence interval, the more information it provides on the real magnitude of the population mean. A too wide confidence
interval on the other hand provides us with a wide range of possible values
for the population mean, and little information about the magnitude of the
mean itself. Consequently, when designing a research study researchers often
want to determine the sample size needed to obtain a confidence interval with
a pre-specified length L.
We have seen that the confidence interval of the population mean generally has the form (x E; x + E) where
x is the sample mean, and E the
margin of error defined as E = z/2 s/ n when n is reasonably large. n is the
sample size, s the standard deviation10 , and z/2 the 100(1 /2)th percentile
of the standard Normal distribution with = 1 Confidence Level.
For a specified error margin E and confidence level 1, the desired sample
size is given by,


z/2 s 2
(2.7)
n=
.
E
If it is the length L of the confidence interval that is provided, then the desired
sample size will be given by:


n=

z/2 s
L/2

2

(2.8)

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The predicted sample size n obtained by either equation must be rounded


UP to the nearest integer value to ensure a confidence interval that matches
the pre-determined error margin or is narrower.

11

Note that the sample mean is always the center of the confidence interval.
Therefore the population mean is always within the error margin of the sample
mean at the specified confidence level.
10

Note that s could be the true population standard deviation when it is known, or
could be its estimated value obtained from a pilot study. Even a small pilot may yield an
estimated standard deviation sufficiently precise for the purpose of calculating the sample
size.
11
Rounding up to nearest integer means 56.02 for example will be rounded up to 57.

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- 60 -

Chapter 2: Confidence Intervals for a Population Mean

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Exercise 2.40 
A population is estimated to have a standard deviation of 10. We
want to estimate the population mean within 2, with a 95 percent
level of confidence. How large a sample is required ?

Solution

Table 2.36 : Input information

Standard deviation: s=10


Error Margin:
E=2
Confidence Level:
0.95 (or = 0.05)

The 97.5th percentile12 of the standard Normal distribution is z/2 = 1.96,


which leads to the predicted sample size of,

2
1.96 10
n=
= 97.
2


Exercise 2.41 
We want to estimate the population mean within 5, with a 99 percent
level of confidence. The population standard deviation is estimated
to be 15. How large a sample is required ?

Solution

on
t

Table 2.37 : Input information

Standard deviation: s=15


Error Margin:
E=5
Confidence Level:
0.99 (or = 0.01)

The 99.5th percentile13 of the standard Normal distribution is z/2 = 2.58,


which leads to the predicted sample size of,

2
2.58 15
n=
= 60.
5
12
13

Note that 97.5 = 100 (1 /2)


Note that 99.5 = 100 (1 /2)

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Excels Analysis ToolPak

The objective of this chapter is two-fold: (i) to provide detailed instructions


for installing the Excel 2010 Analysis ToolPak add-in, and (ii) to show how
the ToolPak is used to construct confidence from raw input data.

4.1

Installing the Analysis ToolPak for Excel 2010

The installation if the Excel 2010 Analysis ToolPak can be carried


out in 4 easy steps, which are described as follows:

1  Opening the Excel Options Form

on
t

From the main Excel menu, select the File tab from the menu bar, then Options
as shown in Figure 4.1. These actions should open the Excel Options form of
Figure 4.2.

Select "Options"

Figure 4.1. Opening the Excel Options Form

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