Question

A retired statistician was interested in determining the average cost of a $200,000.00 term life insurance policy for a 60-year-old male non-smoker. He randomly sampled 65 subjects (60-year-old male non-smokers) and constructed the following 95 percent confidence interval for the mean cost of the term life insurance: ($850.00, $1050.00). Explain what the phrase "95 percent confident" means in this situation.

Answer 1

Solution :

The 95% confidence interval for the mean cost of term life insurance is ($850.00, $1050.00).

We can interpret the interval as follows :

We are 95% confident that true mean cost of term life insurance lies between $850.00 and $1050.00.

In other words the phrase 95% confident can be interpreted as follows :

If we construct 100 such confidence intervals from the samples of sizes 65, then the true value of the mean cost of term life insurance will be included in the 95 of the 100 confidence intervals.