Question

In an article about disinflation, various investments were examined. The investments included stocks, bonds, and real estate. Suppose that a random sample of 200 rates of return on real estate investments was computed and recorded. Assuming that the standard deviation of all rates of return on real estate investments is 2.25%, estimate an interval for the mean rate of return on all real estate investments with 95% confidence
Interpret the estimate.

Answer 1

Answer:

Step-by-step explanation:

Using the formula for calculating the confidence interval to estimate an interval for the mean rate of return on all real estate investments with 95% confidence;

Confidence Interval = xbar±(Z*S/√n)

xbar is the mean = 20%(assumed since we are not given)

n is the sample size = 200

S is the standard deviation = 2.25%

Z is the Z score at 95% confidence interval = 1.960

Confidence Interval = 20±(1.96*2.25/√200)

Confidence Interval = 20±(1.96*2.25/14.14)

Confidence Interval = 20±(1.96*0.159)

Confidence Interval = 20±0.312

Confidence Interval = (20-0.312, 20+0.312)

Confidence Interval = (19.688, 20.312)

Hence the interval for the mean rate of return on all real estate investments with 95% confidence is 19.688<x<20.312.

This means that the minimum rate of return on investment is 19.688% and the maximum rate of return on investment is 20.312%.(assuming 20% as the mean)