Question

5. A bank manager wants to know the mean amount of mortgage paid per month by homeowners in an area. A random sample of 120 homeowners selected from this area showed that they pay an average of $1875 per month for their mortgages. The population standard deviation of such mortgages is $245. Find a 97% confidence interval for the mean amount of mortgage paid per month by all homeowners in this area.

Answer 1

Z for 97% confidence interval = Z_0.015 = 2.17

Confidence interval

                               $=(1875 \pm 2.17 * \frac{245}{\sqrt{120}})$

                               $=(1875 \pm 48.53)$

                               = (1826.47 , 1923.53)