What's the future value of $1,200 after 5 years if the appropriate interest rate is 6%, compounded monthly?
1 answer:
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Answer:
a) 0.24356 or 24.36%
b) [102.39 , 105.61]
c) The interpretation of this confidence interval is that in samples of 427 people aged 65 years and older, there is a 99% probability that the number of people that suffers sleep apnea is between 103 and 105.
Step-by-step explanation:
a)
This can be considered a binomial distribution (a person either has sleep apnea or not).
Based on the sample we have the probability of suffering the condition is
p = 104/427 = 0.24356
and q (the probability of not suffering the condition) is
q=1-0.24356=0.75644
So the proportion of people aged 65 years and older who have sleep apnea is 0.24356 or 24.36%
b)
To check if we can <em>approximate this binomial distribution with the Normal distribution</em> we must see that
np ≥ 5 and nq ≥ 5
where n is the sample size. Since
427*0.24356 ≥ 5 and 427*0.75644 ≥ 5
we can approximate the binomial with a Normal distribution with mean
np = 427*0.24356 = 104
and standard deviation
The 99% confidence interval (without the continuity correction factor) is given by the interval
where
<em>is the sample mean </em>
<em>s is the sample standard deviation </em>
<em>n is the sample size </em>
<em>is the 0.01 (99%) upper critical value for
</em>
<em>the Normal distribution N(0;1). </em>
The value of can be found either by using a table or a computer to find it equals to
and our 99% confidence interval <em>(without continuity correction) </em>is
We can now introduce the continuity correction factor. This should be done because <em>we are approximating a discrete distribution (Binomial) with a continuous one (Normal). </em>
This is simply done by widening the interval in 0.5 at each end, so our final 99% confidence interval is
[102.3946 , 105.6054] = [102.39 , 105.61] rounded to 2 decimal places.
c)
The interpretation of this confidence interval is that in samples of 427 people aged 65 years and older, there is a 99% probability that the number of people that suffers sleep apnea is between 103 and 105.
If another study found a 15% of elderly people suffered sleep apnea, that would mean that in a sample of 427 only 64 would have the condition. Since that number is less than 103 by far, that would give us a reason to doubt about the conditions that framed the study (sample size, sampling method, age of people, etc.)