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In: Statistics and Probability

The Chartered Financial Analyst (CFA) designation is fast becoming a requirement for serious investment professionals. Although...

The Chartered Financial Analyst (CFA) designation is fast becoming a requirement for serious investment professionals. Although it requires a successful completion of three levels of grueling exams, it also entails promising careers with lucrative salaries. A student of finance is curious about the average salary of a CFA® charterholder. He takes a random sample of 45 recent charterholders and computes a mean salary of $155,000 with a standard deviation of $18,000. Use this sample information to determine the 95% confidence interval for the average salary of a CFA charterholder. Assume that salaries are normally distributed.

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Expert Solution

We have given that,              
              
Sample mean =$155000      
Sample standard deviation =$18000  
Sample size =45      
Level of significance=1-0.95=0.05      
Degree of freedom =44      
              
t critical value is (by using t table)=   2.015      
              
Confidence interval formula is               
  

=(149593.1876 , 160406.8124)              
              
              
Lower confidence limit=   $149593.19      
              
Upper confidence limit=   $160406.81  


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