Question

What are the fundamental components of a confidence interval?

Answer 1

Solution :

The fundamental components of a confidence interval are as follows :

1) Point estimate of the parameter for which we want to construct the confidence interval.

2) Confidence level of confidence interval

3) The margin of error at the specified confidence interval.

For example, suppose we want to construct a 95% confidence interval for population mean (μ), then the confidence interval would be as follows (σ known) :

Where, x̄ is point estimate of population mean, E is margin of error at 95% confidence level.

(σ is population standard deviation, n is sample size and Z(0.05/2) is critical z-value at 95% confidence level.)