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 unknown and we have a large sample size, we’ll need to find the t-statistic.
We need to specify the degrees of freedom. For the Student’s T distribution, there are n-1 degrees of freedom. If we have 25 observations in our sample, we’ll have 24 degrees of freedom.
Another related topic you might be interested to explore is Hypothesis Testing for the Mean with known variance.
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The Confidence Interval is among the topics included in the Quantitative Methods module of the CFA Level 1 Curriculum.
