Confidence Intervals

STAT 3381
Some Sections of Chapter 9
Confidence Intervals

( )

1
L U
P u u u o s s =


1.

L
u and

U
u are the lower and upper
confidence limits. These are random
variables.

2. 1 o is called the confidence coefficient.

3. The random interval

,
L U
u u
(

is called a
two-sided confidence interval.

4. We can also talk about one-sided
confidence limits.
Confidence Intervals for a Single Mean

Case 1: Let
1
,...,
n
X X be a random sample from
a normal distribution with unknown mean and
known variance
2
o .
Example: An agronomist examines the
cellulose content of a variety of alfalfa hay.
Suppose that the cellulose content is normally
distributed with a standard deviation of 8 mg/g.
A random sample of 15 cuttings has a sample
mean cellulose content of 145 mg/g. Find a
90% two-sided confidence interval for the true
mean cellulose content of the hay.
Interpretation: What does 90% confident mean?
What if we wanted our confidence interval to
have length l what sample size would we need to
take?









Margin of Error:
2
2
z
l
E
n
o
o
= = so for a given
margin of error
2
2 2
2
z
n
E
o
o
=
Confidence and Precision













Note: For fixed sample size n precision
decreases as confidence level increases and vice
versa.
Now, what if
2
o
is
unknown?
The Students t Distribution

Suppose we have a r.s.
1
,...,
n
X X from a normal
population with mean and variance
2
o . Then

2
~ , X N
n
o

| |
|
\ .
or
( )
~ (0,1)
X
Z N
n

o

=

However o is usually unknown.

What happens if we replace o with s?

( )
1
~
n
X
T t
S n

=

We say this rv follows a students t distribution
with (n-1) degrees of freedom.
Case 2: Let
1
,...,
n
X X be a random sample from
a normal distribution with unknown mean and
unknown variance
2
o which is estimated with
the sample variance
2
S . The for small n a
(1 )100% o confidence interval for is given
by
2
, 1 n
s
x t
n
o

| |

|
\ .
or

2 2
, 1 , 1
,
n n
s s
x t x t
n n
o o

| |
| | | |
+
| |
|
\ . \ .
\ .

Example: A study was conducted to estimate
hospital costs for accident victims who wore seat
belts. Twenty cases are randomly selected and
yield a sample mean of $9004 and a sample
standard deviation of $5629 (based on data from
the U.S. Department of Transportation). If the
hospital costs are normally distributed, construct
a 99% confidence interval for the mean of all
such costs.
Confidence Interval for the Variance
Suppose we have a random sample from a Normal
Population with unknown variance, how do we construct
an interval estimator for
2
. o
Construct a 99% CI for the variance in the
previous example
Prediction Intervals
The prediction interval is used when the experimenter
is interested in the possible value of a single future
observation rather than the mean.
Prediction Intervals account for the variation in the
mean and also the variation of the future observation
x.
V(X- )=
Prediction Interval:
Prediction Interval Example
The prices of homes for sale in a certain area are
normally distributed with standard deviation of $10,000.
A random sample of 10 homes had an average sales
price of $285,000. Find a 98% prediction interval for the
sales price of the next home sold.
Prediction interval for a future
observation when is unknown
Example: Refer to the example of hospital costs.
Construct a 95% prediction interval for the hospital
cost of the next accident victim.
Population Proportion


An approximate (1 )100% o confidence interval
for p is

( ) ( )
2 2

1 1

,
p p p p
p z p z
n n
o o
| |

+ |
|
\ .

Example: In March 1993, Time magazine
reported a telephone poll survey of 800 adults,
of whom 45% stated that they had guns in their
homes. Compute a 95% CI for the proportion p
of homes in the population with guns.
Sample Size Determination
Homework
Page 282: 1,2,6,8,9,12,16,17
Page 302: 53, 54, 55, 57, 58, 59, 63
Next we will begin chapter 10 and wait to
include the two-sample CI with their
respective hypothesis tests.