Page 48 - FINAL CFA I SLIDES JUNE 2019 DAY 3
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LOS 10.k: Determine the p that a normally Session Unit 3:
distributed random variable lies inside a given 10. Common Probability Distributions
interval, p.225
A confidence interval is a range of values around the expected outcome within
which we expect the actual outcome to be some specified % of the time (e.g. -
10% <mean/mode> +10)
For a normal distribution, the CI is based on the EV (point estimate) of the RV and on
its variability (SD).
A 95% CI is a range that we expect the RV (E(x) to be in 95% of the time
In practice, we will not know the actual values for the mean and SD, but will have
estimated them as X and s.
The 3CIs of most interest being:
• The 90% confidence interval for X is X – 1.65s to X + 1.65s.
• The 95% confidence interval for X is X – 1.96s to X + 1.96s.
• The 99% confidence interval for X is X – 2.58s to X + 2.58s.
