The Chartered Financial Analyst (CFA®) designation is fast becoming a requiremen
ID: 3358396 • Letter: T
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 25 recent charterholders and computes a mean salary of $139,000 with a standard deviation of $25,000. Use this sample information to determine the 90% confidence interval for the average salary of a CFA® charterholder. Assume that salaries are normally distributed. (Round intermediate calculations to 4 decimal places. Round "t" value to 3 decimal places and final answers to the nearest whole number.)
Explanation / Answer
Mean is 139000 and s is 25000, for a sample size of 25, the standard error is s/sqrt(N)=25000/sqrt(5)=5000
For 95% confidence, the z value is 1.96
thus lower limit is mean-s*z =139000-1.96*5000=129200
upper limit is mean+z*s=139000+1.96*5000=148800