Question

The average (EPS) for 10 industrial stocks randomly selected from those listed on the Dow-Jones Industrial Average was found to be 10.01 with a standard deviation of 3.89. What is the 99% Error Bound (EBM)?

Answer 1

Solution :

Given that,

Point estimate = sample mean = = 10.01

sample standard deviation = s = 3.89

sample size = n = 10

Degrees of freedom = df = n - 1 = 9

At 99% confidence level the z is ,

= 1 - 99% = 1 - 0.99 = 0.01

/ 2 = 0.01 / 2 = 0.005

t _/2,df = t_0.005,24 = 3.250

Margin of error = E = t_/2,df * (s /n)

= 3.250 * ( 3.89/ 10)

= 3.998