The daily net cash flows in the table below represent a 5-day sample. Use the Data Analysis tool in Excel to calculate the 95% and 99% confidence intervals for the daily net cash flows. Along with your calculation, interpret the meaning behind your confidence interval estimates and discuss why the 99% confidence interval is wider.
Day |
Net Cash Flow |
1 |
15,000 |
2 |
17,000 |
3 |
13,000 |
4 |
20,000 |
5 |
14,000 |
Solution:
Here, we have to find the 95% and 99% confidence intervals for the daily net cash flow by using the excel.
The excel output for the 95% confidence interval for the average daily net cash flow is given as below:
Confidence Interval Estimate for the Mean |
|
Data |
|
Sample Standard Deviation |
2774.887385 |
Sample Mean |
15,800 |
Sample Size |
5 |
Confidence Level |
95% |
Intermediate Calculations |
|
Standard Error of the Mean |
1240.967365 |
Degrees of Freedom |
4 |
t Value |
2.7764 |
Interval Half Width |
3445.4778 |
Confidence Interval |
|
Interval Lower Limit |
12354.52 |
Interval Upper Limit |
19245.48 |
The excel output for the 99% confidence interval for the average daily net cash flow is given as below:
Confidence Interval Estimate for the Mean |
|
Data |
|
Sample Standard Deviation |
2774.887385 |
Sample Mean |
15,800 |
Sample Size |
5 |
Confidence Level |
99% |
Intermediate Calculations |
|
Standard Error of the Mean |
1240.967365 |
Degrees of Freedom |
4 |
t Value |
4.6041 |
Interval Half Width |
5713.5315 |
Confidence Interval |
|
Interval Lower Limit |
10086.47 |
Interval Upper Limit |
21513.53 |
From above two intervals, it is observed that the 99% confidence interval is wider than the 95% confidence interval. We are given that all other values are same for both intervals. The margin of error is more for 99% interval, and this is due to t critical value. The t critical value for 99% confidence interval is more than the t critical value for 95% interval. In 99% confidence interval, we are more confident about the interval for the population mean and that’s why the 99% confidence interval is wider.
The daily net cash flows in the table below represent a 5-day sample. Use the Data...
Short Answer Question 3: The daily net cash flows in the table below represent a 5-day sample. Use the Data Analysis tool in Excel to calculate the 95% and 99% confidence intervals for the daily net cash flows. Along with your calculation, interpret the meaning behind your confidence interval estimates and discuss why the 99% confidence interval is wider. Day Net Cash Flow 1 15,000 2 17,000 13,000 3 4 20,000 5 14,000
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