Question

The Chartered Financial Analyst (CFA®) designation is fast becoming a requirement for serious investment professionals. Although it requires a successful completion of three levels of grueling exams,it also entails promising careers with lucrative salaries. A student of finance is curious about the average salary of a CFA® charterholder. He takes a random sample of 36 recent charterholders and computes a mean salary of $162,000 with a standard deviation of $36,000.

Use this sample information to determine the upper bound of the 90% confidence interval for the average salary of a CFA® charterholder. (Round the "t" value to 3 decimal places.)

Answer 1

solution:

Given that,

= 162000

s =36000

n = 36

Degrees of freedom = df = n - 1 =36 - 1 = 35

At 90% confidence level the t is ,

= 1 - 90% = 1 - 0.90 = 0.1

/ 2 = 0.1 / 2 = 0.05

t /2,df = t0.05,35 = 1.812 ( using student t table)

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

= 1.812* ( 36000/ 36) = 10872

The 90% upper bound confidence interval is,

+ E

162000+10872

172872

upper bound of the 90% confidence interval for the average salary of a CFA® charterholder is 172872