I NTRODUCTI ON

DERI VATI ON
NOTATI ONS AND GENERAL FORM
1 SAMPLE Z- I NTERVAL FOR
1 SAMPLE T- I NTERVAL FOR
2 I NDEPENDENT SAMPLE T- I NTERVAL FOR
2 DEPENDENT SAMPLE T- I NTERVAL FOR
Z- I NTERVAL FOR P
SAMPLE SI ZE


Chapter 7
Confidence Intervals
Introduction
In this chapter, we will estimate the population parameter
using an interval.

This interval will capture the true population parameter with
a certain measure of precision.


Example: A 95% confidence interval for is (13, 18)
Notations and General Form
CI - confidence interval
CV - critical value
ME - margin of error
SE - standard error
SD - standard deviation
pt.est. - point estimate
Z
/2
- normal distribution critical value(use invnorm)
t
(n-1,/2)
- students t distribution critical value with n-1
degrees of freedom (use math solver or the invT)
Notations and General Form
General Formula:
SE CV est Pt .
Notations and General Form
p p
X


Parameter estimate Point
Estimate Point

n
) p - (1 p
SE , p

for
n SD/ SE , X for
(SE) Error Standard
=
=
Notations and General Form
Critical Value

Z-critical value
Z1-
/2
= InvNorm(1 - /2)

example: 95% Confidence interval
= 1 0.95
= 0.05

Z 1-
/2
= InvNorm(1- /2)
= InvNorm(1-(.05/2))
= 1.96

Notations and General Form
Critical Value

T-critical value
t
(1- /2, df)
= InvT(1-/2, degrees of freedom)
or
t
(1- /2, df)
= L on math solver (for TI-83)

Math -> solver -> tcdf(L,U,D) A
L = CV
U = 9999
D = degrees of freedom
A = /2
Notations and General Form
Example: 95% confidence interval based on a sample
size of 20. ( = .05, df = n-1 = 19)

T-critical value
t
(1- /2, df)
= InvT(1-(0.05/2), 19)

Math->solver->tcdf(L,U,D) A
L = CV (highlight and then press alpha enter)
U = 9999
D = 19
A = .025

ANSWER: t
(1-0.025, 19)
= 2.0930
1 Sample Z-interval for
Error of Margin ) / (
Error Standard ) / (
Value Critical
. .
where
) / (
Formula
2 / 1
2 / 1
2 /
=
=
=
=

n Z
n
Z
est pt X
n Z X
o
o
o
o
o
o
Population Standard Deviation () is known
1 Sample Z-interval for
Suppose the time allotted for commercials on a primetime
TV program is known to have a normal distribution with a
standard deviation of 1.5 minutes. A study of 25 showings
gave an average commercial time of 11 minutes. Find the
95% confidence interval for the true population mean, .

Given:




Confidence level = 0.95
Critical value = invNorm(1-.05/2) = 1.96



11
25 n
deviation) standard population known the is (this 1.5
=
=
=
X
o
1 Sample Z-interval for
A 95% confidence interval for is
) 588 . 11 , 412 . 10 (
588 . 0 11
3 . 0 * 96 . 1 11
) 25 / 5 . 1 ( * 96 . 1 11
) / ( *
* .

n Z X
SE CV est pt
o

We are 95% confident that the average time in
commercials is between 10.412 and 11.588 minutes
Using 1-sampZInterval in TI-83/84
Stat -> Tests -> ZInterval
Notes on intervals
Effect of confidence level
Higher confidence level results to a longer confidence
interval since CV increases as decreases.

Example, Z = 1.645 when = .10 while Z = 1.96 when = .05

Effect of sample size
Increasing sample size (n) shortens the confidence
interval since SE = SD/sqrt(n).

Note: level of significance ()
confidence level (1- )*100%
1 Sample t-interval for
1 - n df
Error of Margin ) / (
Error Standard /
Value Critical
. .
where
) / (
Formula
) 1 , 2 / 1 (
) 1 , 2 / 1 (
) 1 , 2 / (
=
=
=
=
=

n SD t
n SD
t
est pt X
n SD t X
n
n
n
o
o
o
Population Standard Deviation () is unknown
1 Sample t-interval for
A random sample of 12 graduates of a certain secretarial school typed an
average of 79.3 words per minute with a standard deviation of 7.8 words
per minute. Assuming normal distribution for the number of words typed
per minute, find a 95% confidence interval for the average number of
words typed by all graduates of this school.

Given:






Confidence level = 0.95
Critical value = 2.201

8 . 7
3 . 79
12 n
given not
=
=
=
=
SD
X
o
1 Sample t-interval for
A 95% confidence interval for is
) 2559 . 84 , 3441 . 74 (
9559 . 4 3 . 79
2517 . 2 * 201 . 2 3 . 79
) 12 / 8 . 7 ( * 201 . 2 3 . 79
) / (

n SD t X

We are 95% confident that the average number of words
the graduates type per minute is between 74.3441 and 84.2559
words.
Using 1-samptInterval in TI-83/84
Stat -> Tests -> tInterval
2 Independent Sample t-interval for
Value Critical t
2
) 1 ( ) 1 (

where
1 1
) (
Formula
) 2 2 1 , 2 / (
2 1
2
2 2
2
1 1
2
2 1
2
) 2 2 1 , 2 / (
2 1
=
+
+
=
|
|
.
|

\
|
+
+
+
n n
p
p
n n
n n
S n S n
S
n n
S t X X
o
o
.
Confidence Interval for
1
-
2
Requirement 1: Both samples where taken from a normal distribution
Requirement 2: The population standard deviations are equal (
1
=
2
=)

2 Independent Sample t-interval for
Do credit cards with no annual fee charge higher interest rates than
cards that have annual fees? Among 29 cards surveyed, 17 had no
annual fees while 12 charged an annual fee. Among the cards with no
annual fee, the average interest rate was 19% (SD = 8%). Among cards
with an annual fee, the average interest rate was 17% (SD = 3%).
a. What assumptions do you need to get a confidence interval for the
difference in average interest rate?

b. Calculate the estimate of the common standard deviation.

c. Construct a 95% interval estimate for the difference in average
interest rates.

2 Independent Sample t-interval for
a. What assumptions do you need to get a confidence interval for
the difference in average interest rate?

The samples were taken from normally distributed populations
and that they have a common standard deviation.

2 Independent Sample t-interval for
b. Calculate the estimate of the common standard deviation.
004159 . 0
2 12 17
03 . 0 ) 1 12 ( 08 . 0 ) 1 17 (
2
) 1 ( ) 1 (
2 2
2 2
2
=
+
+
=
+
+
=
W WO
W W WO WO
p
n n
S n S n
S
No Annual Fee With Annual Fee
Average ( ) 0.19 0.17 0.19 0.17 = 0.02
SD (S) 0.08 0.03
Sample Size (n) 17 12
W WO
X X
2 Independent Sample t-interval for
c. Construct a 95% interval estimate for the difference in average interest
rates.

Level of Confidence (1-) = 0.95 = 0.05
Critical value (t
/2,df=n1+n2-2
= t
0.05/2,df=27
= t
0.025,27
) = 2.052

A 95% confidence interval for is calculated as

) 06989 . 0 , 0299 . 0 (
0498964063 . 0 02 . 0
) 0243159875 . 0 ( 052 . 2 02 . 0
12
1
17
1
0041592593 . 0 052 . 2 02 . 0
1 1
) (
2 1
2

|
.
|

\
|
+
|
|
.
|

\
|
+
n n
S t X X
p W WO
Therefore, with 95% confidence, the difference in average interest
rate will lie between -2.99% and 6.99%.
2 Independent Sample t-interval for
No Annual Fee With Annual Fee
Average ( ) 0.19 0.17 0.19 0.17 = 0.02
SD (S) 0.08 0.03
Sample Size (n) 17 12
Using 2-samptInterval in TI-83/84
Stat -> Tests -> 2samptInt
2 Independent Sample t-interval for
Suppose it is of interest to estimate the difference in
the first exam scores of STAT 2160 male and female
students. A random sample of 16 males and 17
females taking the course this semester was drawn
and asked about their scores. Among male students,
the average was found to be 15.28 with a standard
deviation of 2.3, while among females, the average is
16.5 with a standard deviation of 1.6. Assuming the
scores follow a normal distribution with equal
variances, construct a 95% CI for the true difference
in the first exam scores of male and female STAT
2160 students.
2 Independent Sample t-interval for
Step 1: Create a table of given values





Step 2: Compute for the common variance
MALE FEMALE
n 16 17
Mean 15.28 16.5
Standard Deviation 2.3 1.6
2
) 1 ( ) 1 (
2 1
2
2 2
2
1 1
2
+
+
=
n n
S n S n
S
p
2 Independent Sample t-interval for
2 17 16
6 . 1 ) 1 17 ( 3 . 2 ) 1 16 (
2 2
2
+
+
=
p
S
880967742 . 3
2
=
p
S
2 Independent Sample t-interval for
Step 3: Obtain the Critical Value (CV)

95% CI = 0.05
CV = invT(1-/2, n
1
+n
2
-2)
= invT(0.975, 31)
= 2.0395
2 Independent Sample t-interval for
Step 4: Plug-in the values in the CI formula


|
|
.
|

\
|
+ +
2 1
2
) 2 2 1 , 2 / (
2 1
1 1
) (
n n
S t X X
p
n n o
|
.
|

\
|
+
17
1
16
1
880967742 . 3 0395 . 2 ) 5 . 16 5.28 1 (
) 6861870765 . 0 ( 0395 . 2 1.22
( ) 1795 . 0 , 6195 . 2
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2 Dependent Sample t-interval for
There is one sample but measured twice
s difference the of SE n / SD
value Critical
s difference the of average X
where
) / (
Formula
DIFF
) 1 , 2 / (
DIFF
DIFF ) 1 , 2 / (
=
=
=

n
n
DIFF
t
n SD t X
o
o
2 Dependent Sample t-interval for
The table below shows the opening and closing prices of a sample of 10 active
stocks on a certain day. Give an estimate of the difference in the average stock
prices? What is the corresponding standard error of this estimate?
Opening Price Closing Price
Intel Corp 16.09 16.25
Citigroup Inc 17.47 16.32
Bank of America Corp 25.6 24.67
JPMorgan Chase & Co 41.52 42.33
General Electric Co 20.11 19.37
Microsoft Corp 23.77 23.44
Pfizer Inc 17.03 16.93
Exxon Mobil Corp 67.69 62.92
Coca-Cola Co 46.48 49.23
Alcoa Inc 11.54 10.09
2 Dependent Sample t-interval for
First, we need to take the difference between the two prices for each
stock.
Opening Price Closing Price Difference
Intel Corp 16.09 16.25 -0.16
Citigroup Inc 17.47 16.32 1.15
Bank of America Corp 25.6 24.67 0.93
JPMorgan Chase & Co 41.52 42.33 -0.81
General Electric Co 20.11 19.37 0.74
Microsoft Corp 23.77 23.44 0.33
Pfizer Inc 17.03 16.93 0.1
Exxon Mobil Corp 67.69 62.92 4.77
Coca-Cola Co 46.48 49.23 -2.75
Alcoa Inc 11.54 10.09 1.45
2 Dependent Sample t-interval for
Then calculate the mean of the differences and the corresponding
standard deviation then calculate the standard error.
6022850008 . 0
10
904592403 . 1
) (
904592403 . 1
575 . 0
= = =
=
=
n
S
X SE
S
X
DIFF
DIFF
DIFF
DIFF
2 Dependent Sample t-interval for
Construct a 95% confidence interval for the
difference in opening and closing stock prices.

Use 1-samptInterval in TI-83/84 since we converted
the two samples into a sample of differences.


Answer: (-0.7875, 1.9375)
Z-interval for P
Error Standard / ) 1 (
Value Critical
where
/ ) 1 (
Formula
2 /
2 /
=
=

n p p
Z
n p p Z p


o
o
Z-interval for P
In a random sample of 500 families owning television sets in the city of
Hamilton, Canada, it was found that 340 subscribed to HBO. Find a 95%
confidence interval for the actual proportion of families in this city who
subscribe to HBO.

Given:


Find: A 95% CI for the population proportion, p.

Level of Confidence (1-) = 0.95 = 0.05
Critical value (z
1-/2
= z
1-0.05/2
= z
0.975
) = InvNorm(0.975) = 1.96



68 . 0
500
340
size sample
sample in the successes #
= = = p

Z-interval for P
The confidence interval is calculated as follows:
7209 . 0 , 6391 . 0
0408884375 . 0 68 . 0
) 0208614477 . 0 ( 96 . 1 68 . 0
500
) 68 . 0 1 ( * 68 . 0
96 . 1 68 . 0
/ ) 1 (

n p p z p

Therefore, we are 95% confident that the actual proportion of
families in this city who subscribe to HBO is between 64% and
72%.
A function in TI-83/84 is 1propZInt. Stat -> Tests -> 1propZInt
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Sample Size
In order to be (1-) x 100% confident that the sample mean is within a
distance ME of the mean , choose a sample size equal to

n = z
2

2
/M
2



For computing sample size for estimating population proportion,
the formula is


2
2
) 1 (
M
p p z
n

=
Sample Size
A consumer group wishes to estimate the average electric bills for the month of
July for single-family homes in a large city. Based on studies conducted in other
cities, the standard deviation is assumed to be $25. The group wants to estimate
the average bill for July to be within $5 of the true average with 95% confidence.

a. How many single-family homes should be selected?
b. If the group wants to be correct to within $10, what sample size is
necessary?
c. If 99% confidence and a sampling error of $5 are desired, how many
single-family homes are necessary?

Given: ME = 5
Level of Confidence (1-) = 0.95 = 0.05
Critical value (z
/2
= z
0.05/2
= z
0.025
) = InvNorm(0.025) = -1.96
= 25

Sample Size
homes family - single 97
04 . 96
) 5 (
) 25 ( ) 96 . 1 (

2
2 2
2
2 2
~
=
=
=
M
z
n
o
a. How many single-family homes should be selected?

Given: ME = 5
Level of Confidence (1-) = 0.95 = 0.05
Critical value (z
/2
= z
0.05/2
= z
0.025
) = InvNorm(0.025) = -1.96
= 25

Sample Size
b. If the group wants to be correct to within $10, what sample size is
necessary?
homes family - single 25
01 . 24
) 10 (
) 25 ( ) 96 . 1 (

2
2 2
2
2 2
~
=
=
=
M
z
n
o
Sample Size
c. If 99% confidence and a sampling error of $5 are desired, how many
single-family homes are necessary?

M = 5
Level of Confidence (1-) = 0.99 = 0.01
Critical value (z
/2
= z
0.01/2
= z
0.005
) = InvNorm(0.01/2) = -2.576
= 25

homes family - single 166
89 . 165
) 5 (
) 25 ( ) 576 . 2 (

2
2 2
2
2 2
~
=
=
=
M
z
n
o
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Sample Size
In a random sample of 500 families owning television sets in the city of Hamilton,
Canada, it was found that 340 subscribed to HBO. Suppose that a CI for the
proportion of families who subscribe to HBO is computed at 90% confidence level
and within 0.05, what will the new sample size be?


236
53 . 235
05 . 0
) 68 . 1 ( * 68 . *
1.645
) 1 (
0.05 ME
1.645 0/2) invNorm(.1 Z
68 . 0 : Given
2
2
2
2
/2
~
=

=
=
= =
=
ME
p p z
n
p

o
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