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    In summary, as a result of the central limit theorem:

  • X - is normally distributed, that is, X - ~ N ( μ X - , σ n ) .
  • When the population standard deviation σ is known, we use a normal distribution to calculate the error bound to get the confidence interval.

Calculating the confidence interval

To construct a confidence interval estimate for an unknown population mean, we need data from a random sample. The steps to construct and interpret the confidence interval are:

  • Calculate the sample mean x - from the sample data. Remember, in this section we already know the population standard deviation σ .
  • Find the z -score from the standard normal table that corresponds to the confidence level.
  • Calculate the error bound EBM .
  • Construct the confidence interval.
  • Write a sentence that interprets the estimate in the context of the situation in the problem. (Explain what the confidence interval means, in the words of the problem.)

We will first examine each step in more detail, and then illustrate the process with some examples.

Finding the z -score for the stated confidence level

When we know the population standard deviation σ , we use a standard normal distribution to calculate the error bound EBM and construct the confidence interval. We need to find the value of z that puts an area equal to the confidence level (in decimal form) in the middle of the standard normal distribution Z ~ N (0, 1).

The confidence level, CL , is the area in the middle of the standard normal distribution. CL = 1 – α , so α is the area that is split equally between the two tails. Each of the tails contains an area equal to α 2 .

The z-score that has an area to the right of α 2 is denoted by Z α 2 .

For example, when CL = 0.95, α = 0.05 and α 2 = 0.025; we write Z α 2 = Z 0.025 .

The area to the right of Z 0.025 is 0.025 and the area to the left of Z 0.025 is 1 – 0.025 = 0.975.

Z α 2  =  Z 0.025  = 1 .96 , using a standard normal probability table. We will see later that we can use a different probability table, the Student's t-distribution, for finding the number of standard deviations of commonly used levels of confidence.

Calculating the error bound ( EBM )

The error bound formula for an unknown population mean μ when the population standard deviation σ is known is

  • EBM = ( Z α 2 ) ( σ n )

Constructing the confidence interval

  • The confidence interval estimate has the format ( x - E B M , x - + E B M ) or the formula: X - Z α ( σ n ) μ X - + Z α ( σ n )

The graph gives a picture of the entire situation.

CL + α 2 + α 2 = CL + α = 1.

This is a normal distribution curve. The peak of the curve coincides with the point x-bar on the horizontal axis. The points x-bar - EBM and x-bar + EBM are labeled on the axis. Vertical lines are drawn from these points to the curve, and the region between the lines is shaded. The shaded region has area equal to 1 - a and represents the confidence level. Each unshaded tail has area a/2.

Writing the interpretation

The interpretation should clearly state the confidence level ( CL ), explain what population parameter is being estimated (here, a population mean ), and state the confidence interval (both endpoints). "We estimate with ___% confidence that the true population mean (include the context of the problem) is between ___ and ___ (include appropriate units)."

Suppose we are interested in the mean scores on an exam. A random sample of 36 scores is taken and gives a sample mean (sample mean score) of 68 ( X - = 68). In this example we have the unusual knowledge that the population standard deviation is 3 points. Do not count on knowing the population parameters outside of textbook examples. Find a confidence interval estimate for the population mean exam score (the mean score on all exams).

Find a 90% confidence interval for the true (population) mean of statistics exam scores.

  • The solution is shown step-by-step.

To find the confidence interval, you need the sample mean, x - , and the EBM .

  • x - = 68
  • EBM = ( Z α 2 ) ( σ n )
  • σ = 3; n = 36; The confidence level is 90% ( CL = 0.90)

CL = 0.90 so α = 1 – CL = 1 – 0.90 = 0.10

α 2 = 0.05 Z α 2 = z 0.05

The area to the right of Z 0.05 is 0.05 and the area to the left of Z 0.05 is 1 – 0.05 = 0.95.

Z α 2  =  Z 0.05  = 1 .645

This can be found using a computer, or using a probability table for the standard normal distribution. Because the common levels of confidence in the social sciences are 90%, 95% and 99% it will not be long until you become familiar with the numbers , 1.645, 1.96, and 2.56

EBM = (1.645) ( 3 36 ) = 0.8225

x - - EBM = 68 - 0.8225 = 67.1775

x - + EBM = 68 + 0.8225 = 68.8225

The 90% confidence interval is (67.1775, 68.8225).

Interpretation

We estimate with 90% confidence that the true population mean exam score for all statistics students is between 67.18 and 68.82.

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Source:  OpenStax, Introductory statistics. OpenStax CNX. Aug 09, 2016 Download for free at http://legacy.cnx.org/content/col11776/1.26
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