Question

If you rent a car from a local car rental company, the daily rental rate for the same car in the same city can vary depending on which location you rent the car from. On July 17, 2018, daily rental rates at a sample of 8 rental locations for a Toyota Camry were quoted as $30, $31, $31, $32, $35, $36, $36, $43.

Calculate and interpret a 96% confidence interval estimate for the true average daily rental rate for a Toyota Camry at all locations on that date. Use a 96% confidence level.

Answer 1

Solution:

Confidence interval for Population mean is given as below:

Confidence interval = Xbar ± t*S/sqrt(n)

From given data, we have

Xbar = 34.25

S = 4.267819785

n = 8

df = n – 1 = 7

Confidence level = 96%

Critical t value = 2.5168

(by using t-table)

Confidence interval = Xbar ± t*S/sqrt(n)

Confidence interval = 34.25 ± 2.5168*4.267819785/sqrt(8)

Confidence interval = 34.25 ± 3.7975

Lower limit = 34.25 - 3.7975 = 30.4525

Upper limit = 34.25 + 3.7975 = 38.0475

Confidence interval = (30.45, 38.05)