Question

A family is relocating from St. Louis, Missouri, to California. Due to an increasing inventory of houses in St. Louis, it is taking longer than before to sell a house. The wife is concerned and wants to know when it is optimal to put their house on the market. Her realtor friend informs them that the last 25 houses that sold in their neighborhood took an average time of 85 days to sell. The realtor also tells them that based on her prior experience, the population standard deviation is 12 days.

a. What assumption regarding the population is necessary for making an interval estimate for the population mean? Assume that the central limit theorem applies. Assume that the population has a normal distribution.

b. Construct the 99% confidence interval for the mean sale time for all homes in the neighborhood. (Round intermediate calculations to at least 4 decimal places. Round "z" value to 3 decimal places and final answers to 2 decimal places.)

Confidence interval to

Answer 1

Solution :

Given that,

Point estimate = sample mean = = 85 days

Population standard deviation =    = 12 days

Sample size = n = 25

a) Assume that the population has a normal distribution.

b) At 99% confidence level

= 1 - 99%  

= 1 - 0.99 =0.01

/2 = 0.005

Z/2 = Z0.005  = 2.576

Margin of error = E = Z/2 * ( /n)

= 2.576 * ( 12 /  25 )

= 6.18

At 99% confidence interval estimate of the population mean is,

  ± E

85 ± 6.18   

( 78.82, 91.18 )