CFA Level I · CFA Level I Exam · Estimation and Hypothesis Testing
An analyst wants to raise the confidence level of an interval for a population mean from 90% to 99% without changing the sample. The interval will most likely become:
The interval becomes wider. A 99% confidence level needs a larger reliability factor than a 90% level, and with the same sample the standard error is unchanged, so the margin of error and therefore the width of the interval increase.
- Anarrower, with a smaller reliability factor
- Bwider, because the reliability factor increasesCorrect
- Cunchanged, because the standard error stays the same
Explanation
A higher confidence level requires a larger reliability factor (for example z of 2.58 instead of 1.645). With the same standard error, the margin of error and the interval width increase.
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