Big Picture in Focus: ULOd (Laboratory).

Construct and interpret

confidence interval estimates for the sample mean

Metalanguage

Below are the essential terms you will encounter while learning how to construct
and interpret the confidence interval of the mean using MS Excel. To understand
ULOd, please refresh the topics discussed in ULOa and ULOb.

3. The Confidence Interval is a range of values we are sure our true value lies in.
4. The Confidence Level is the probability that the value of a parameter falls within
a specified range of values.
5. The Standard Error is the approximate standard deviation of a statistical sample
population. The standard error is a statistical term that measures the accuracy
with which a sample distribution represents a population by using standard
deviation.

Essential Knowledge

Before learning how to estimate the sample mean confidence interval using
MS Excel, you need to review first the concept discussed in ULOb. You also need to
review ULOc for the computation of normal probability distribution.

The lesson is estimating the sample mean confidence interval when the
population standard deviation is known. The data you will need to get the confidence
interval are the sample mean (x-bar), the z-stat, and the standard error ( ) or the
√
population SD over the square root of the sample size. The formula of confidence
interval is as follows:
𝜎
𝑋 += 𝑍 / ( )
√𝑛
a/2 means that the test is two-tailed. Meaning there is a lower and upper value. Since
it is two-tailed finding the Z-stat is based on the probability using the following
equation
α = 1 – Confidence Level - 1
Probability = 1 – α/2

For example, if the confidence level you set is 95%, the alpha (α) is equal to 5% (1
– 95%). The probability is 97.5% (1 – (5%/2)) or 0.975. Based on the z-table, the Z-
stat for 0.975 is 1.96. Below is the table for your reference for the confidence level
and the corresponding z-stat.
 Confidence Level Z
80% 1.282
85% 1.440
90% 1.645
95% 1.960
99% 2.576
99.5% 2.807
99.9% 3.291

Let us consider this example, Carton Inc., a cardboard manufacturer has a

production process that operates continuously throughout an entire production shift.
The cardboard is expected to have a mean length of 10 inches, and the population
standard deviation of the length is 0.2 inches. At periodic intervals, a sample is
selected to determine whether the mean cardboard length is still equal to 10 inches
or whether something has gone wrong in the production process to change the length
of the cardboard produced. You select a random sample of 100 sheets, and the mean
cardboard length is 10.02 inches. Construct a 95% confidence interval estimate for
the population mean cardboard length.

6. Open a new worksheet and enter the following data.

7. To determine the alpha (α), enter the following formula in cell B3

=1-B2

8. To determine the probability (p-value), enter the following formula in cell B4

=1-(B3/2)

9. To determine the z-stat you can use the z table or enter the following function in
cell B5
=NORM.S.INV(B4)

10. To determine the lower value of the confidence interval, enter the following formula
in cell B9.
 =B1-(B5*(B6/SQRT(B7)))

11. To determine the upper value of the confidence interval, enter the following formula
in cell B10.
=B1+(B5*(B6/SQRT(B7)))

12. The output should be

13. This leads to the following interval

9.98 < µ < 10.06, µ = 10

You can say that you are 95% confident that the population mean of the carboard
length is between 9.9808 and 10.0592

Try to change the confidence level to 90%. What is the confidence interval?

However, do the population standard deviation is always known? Gathering data of

the whole population is very costly. Most of the time, data analysts analyzed data using
samples. This topic was already discussed in the prior ULO.

𝑆
𝑋 += 𝑡 / ( )
√𝑛
Take note the degree of freedom is n – 1.
Using the same scenario stated above, except that the population standard deviation
is not known, and the sample standard deviation is 0.4, and the number of samples is
30.

1. Insert a new worksheet, and enter the following data

The alpha and the probability formulas are the same as the previous example.

2. To determine the degree of freedom (DOF), enter the following formula in cell B5
=B8-1

3. To determine the t-stat, you can use the student t table or enter the following
function
=T.INV(B4,B5)
4. To determine the lower value of the confidence interval, enter the following formula
in cell B10.
=B1-(B6*((B7/B8)))

5. S To determine the lower value of the confidence interval, enter the following
formula in cell B11.
=B1+(B6*((B7/B8)))

6. The output should be

7. This leads to the following interval

9.99 < µ < 10.05, µ = 10