CFA Level I · CFA Level I Exam · Estimation and Hypothesis Testing
An analyst has a random sample of 64 observations with a sample standard deviation of 12. The population variance is unknown. The standard error of the sample mean is closest to:
The standard error is 1.50. When the population standard deviation is unknown, the sample standard deviation of 12 is divided by the square root of the sample size, √64 = 8, giving 1.50. Dividing by 64 gives 0.19, which is wrong.
- A0.19
- B1.50Correct
- C12.00
Explanation
With unknown population standard deviation, the sample standard deviation is used: s/√n = 12/√64 = 12/8 = 1.50. Using 12/64 gives 0.19, which is the error of dividing by n rather than its square root.
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