Calculating a confidence interval allows us to get an idea about the possible range of realizations of a random variable with a reasonable degree of certainty. If the population variance is known, the population mean will fall between the sample mean minus z of, alpha divided by 2, times the standard error, and, the sample mean plus z of, alpha divided by 2, times the standard error.
If you’re a sales executive, you might want to calculate a range for your sales next quarter with 95% certainty.
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The Confidence Interval is among the topics included in the Quantitative Methods module of the CFA Level 1 Curriculum.
