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    sim0nz12345's Avatar
    sim0nz12345 Posts: 77, Reputation: 2
    Junior Member
     
    #1

    Oct 1, 2009, 01:50 AM
    Confidence intervals
    Hi I am having particular difficulty with this question.

    A financial analyst wants to determine the mean annual return on mutual funds. A random sample of 60 returns shows a mean of 12%, Assume that the population is normally distributed and the population standard deviation is 4%.

    The question is:
    What sample size should we use if we want to estimate the mean annual return with (I) a 95% confidence level and (ii) the width of the interval to be 4%?

    Does the width of the interval of 4% mean that the standard error "e" is 4? And how would you do this question?

    Thanks.
    galactus's Avatar
    galactus Posts: 2,271, Reputation: 282
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    #2

    Oct 2, 2009, 03:29 AM
    Minimum sample size when dealing with proportions can be gotten from the formula:



    .

    Just plug and chug.
    sim0nz12345's Avatar
    sim0nz12345 Posts: 77, Reputation: 2
    Junior Member
     
    #3

    Oct 2, 2009, 07:03 AM

    Thanks. Much appreciated

    I get n = 59.565
    Therefore n =60
    However, I still don't trully understand what the question means by the width of the interval to be 4%.
    galactus's Avatar
    galactus Posts: 2,271, Reputation: 282
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    #4

    Oct 2, 2009, 07:58 AM

    That's the margin of error is within 4% one way or the other.
    sim0nz12345's Avatar
    sim0nz12345 Posts: 77, Reputation: 2
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    #5

    Oct 2, 2009, 09:24 AM

    Yeah that what I thought as well and was taught, but got confused on this wording. Thank you very much for your help and confirmation.

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