CFA Level I · CFA Level I Exam · Estimation and Hypothesis Testing
Compared with a sample of 50 observations, drawing a sample of 200 observations from the same population will most likely cause the standard error of the sample mean to:
The standard error falls by half. Quadrupling the sample size from 50 to 200 divides the standard error by the square root of 4, which is 2, because standard error is inversely proportional to the square root of n.
- Afall by halfCorrect
- Bfall by three-quarters
- Cstay the same
Explanation
Standard error is proportional to 1/√n. Going from 50 to 200 multiplies n by 4, so the standard error is divided by √4 = 2, which halves it. A fall of three-quarters would need n to rise sixteenfold.
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