CFA Level I · CFA Level I Exam · Estimation and Hypothesis Testing
The standard deviation of a sample of 49 daily returns is 2.8%. The population standard deviation is unknown. The estimated standard error of the sample mean is closest to:
The estimated standard error is 0.40%. When the population standard deviation is unknown, the sample standard deviation of 2.8% is divided by the square root of 49, which is 7, giving 0.40%.
- A0.057%
- B0.40%Correct
- C2.80%
Explanation
With σ unknown, standard error = s/√n = 2.8%/√49 = 2.8%/7 = 0.40%. Dividing by 49 gives 0.057%, a mistake of using n instead of √n.
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