In: Statistics and Probability
In a study of annual apartment rental costs in a city, a random sample of 50 apartments has a mean annual rental cost of $11,535 and a standard deviation of $975. Construct a 99% confidence interval for the mean annual apartment rental cost of all apartments in the city. [3 marks]
Solution :
Given that,
Point estimate = sample mean =
= $11535
Population standard deviation =
= $975
Sample size = n =50
At 99% confidence level the z is ,
= 1 - 99% = 1 - 0.99 =
0.01
/ 2 = 0.01 / 2 = 0.005
Z/2
= Z0.005 = 2.576 ( Using z table )
Margin of error = E = Z/2*
(
/
n)
= 2.576* (975 /
50)
= 355.1939
At 99% confidence interval estimate of the population mean is,
-
E <
<
+ E
11535-355.1939 <
< 11535+355.1939
11179.8061<
< 11890.1939
(11179.8061, 11890.1939 )