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Professor Thomas Stanley of Georgia State University has surveyed millionaires since \(1973\). Among other information, Professor Stanley obtains for the mean age, \(\mu\), of all U.S millionaires. Suppose that one year's study involved a simple random sample of \(36\) U.S millionaire whose mean age was \(58.53\) years with a sample standard deviation of \(13.36\) years.

a. If for next year's study, a confidence interval for \(\mu\) is to have a margin of error of \(2\) years and a confidence level of \(95%\), determine the required sample size.

b. Why did you use the sample standard deviation, \(s=13.36\), in place of \(\sigma\) in your solution to part (a)? Why is it permissible to do so?

Short Answer

Expert verified

Part a. The required sample size is \(172\).

Part b. Because sample standard deviations (division \(n-1\)) is an unbiased estimator of population standard deviation \(\sigma\).

Step by step solution

01

Part a. Step 1. Given information

Sample size \(n=36\)

Sample Mean \(\bar{x}=58.53\)

Sample standard deviation \(\sigma=13.36\)

02

Part a. Step 2. Calculation

We have to find the sample size for a confidence interval for \(\mu\) is to have a margin of error of \(2\) years and a confidence level of \(95%\).

The population mean age is \(\mu\)

Sample size \(n=36\)

Sample mean \(\bar{x}=58.53\)

Margin of error \(E=2\)years

Sample Standard deviation \(s=\frac{1}{n-1}\sum_{i-1}^{n}(x_{i}-\bar{x})^{2}\)

\(=13.36\)

For \(100(1-\alpha)%\) confidence interval \(\mu\)

\(n=\left ( \frac{Z_{\alpha/2}\times \sigma}{E} \right )^{2}\)

But here \(\sigma\) is unknown. So, we estimate it by sample standard deviation \(s\).

Here the confidence level \(=95%\)

\(=100\times 0.95%\)

\(1-\alpha=0.95\)

\(\Rightarrow =0.05\)

\(\Rightarrow \frac{\alpha}{2}=0.025\)

\(Z_{\alpha/2}=Z_{0.025}=1.96\) [From standard normal table values]

Sample Size \(n=\left ( \frac{Z_{\alpha/2}\times \sigma}{E} \right )^{2}\)

\(=\left ( \frac{1.96\times 13.36}{2} \right )\)

\(=171.42\)

\(=172\)

Hence, the required sample size is \(172\).

03

Part b. Step 1. Calculation

The population standard deviation, \(\sigma\)is unknown, we used sample standard deviation \(s\) in place of \(\sigma\) because sample standard deviation \(s(division n-1)\) is an unbiased estimator of population standard deviation \(\sigma\) i.e. mean of all possible sample standard deviations(with divisor \(n-1\))is population mean.

Hence, sample standard deviation \(s(division n-1)\) is an unbiased estimator of population standard deviation \(\sigma\).

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