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Creating Confidence Intervals Using Excel

The document describes how to calculate confidence intervals in Excel for estimating population parameters. It discusses using Excel functions like NORM.S.INV, T.INV, and CONFIDENCE.NORM or CONFIDENCE.T to calculate critical values and margins of error for confidence intervals estimating: [1] a population mean when the population standard deviation is known, [2] a population proportion, and [3] a population mean when the population standard deviation is unknown. Notation and examples are provided for each case.

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Faisal
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Download as PDF, TXT or read online on Scribd
70 views

Creating Confidence Intervals Using Excel

The document describes how to calculate confidence intervals in Excel for estimating population parameters. It discusses using Excel functions like NORM.S.INV, T.INV, and CONFIDENCE.NORM or CONFIDENCE.T to calculate critical values and margins of error for confidence intervals estimating: [1] a population mean when the population standard deviation is known, [2] a population proportion, and [3] a population mean when the population standard deviation is unknown. Notation and examples are provided for each case.

Uploaded by

Faisal
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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1

Chapter 7, Using Excel:


Confidence Intervals
These pages demonstrate the Excel functions that can be used to calculate confidence intervals.

• Chapter 7.2 - Estimating a Population Mean (σ known) 2


Here, Excel can calculate the critical value (zα/2 ) and/or the margin of error (E) defined by
σ
E = zα/2 √ .
n

This uses the NORM.S.INV and/or the CONFIDENCE.NORM functions.

• Chapter 7.3 - Estimating a Population Proportion 3


Here, Excel can calculate the critical value (zα/2 ) used in the margin of error defined by
s
p̂ q̂
E = zα/2 .
n
This uses the NORM.S.INV function.
You must then complete the calculations to get the margin of error (E).

• Chapter 7.4 - Estimating a Population Mean (σ unknown) 4


Here, Excel can calculate the critical value (tα/2 ) and/or the margin of error (E) defined by
s
E = tα/2 √ .
n

This uses the T.INV and/or the CONFIDENCE.T functions.


2

Chapter 7.2 - Estimating a Population Mean (σ known)


Here, Excel can calculate the critical value (zα/2 ) and/or the margin of error (E) defined by
σ
E = zα/2 √ ,
n

• Notation:

– E = the margin of error


– zα/2 = the critical value of z.
– σ is the population standard deviation
– n is the sample size
– α = 1 − confidence level (in decimal form)
∗ If the confidence level is 90% then α = 1 − .90 = 0.10.
∗ If the confidence level is 95% then α = 1 − .95 = 0.05.
∗ If the confidence level is 99% then α = 1 − .99 = 0.005.

• Finding the critical value zα/2


Here we use the NORM.S.INV function.
NORM.S.INV stands for the inverse of the standard normal distribution (z-distribution).

General Usage: NORM.S.INV(area to the left of the critical value)


Specific Usage: zα/2 = NORM.S.INV (1 − α/2)

Example: If you want zα/2 for a 95% confidence interval, use

zα/2 = NORM.S.INV(0.975) = 1.960

• Finding the margin of error E


Here we use the CONFIDENCE.NORM function.
CONFIDENCE.NORM stands for the confidence interval from a normal distribution.

Usage: CONFIDENCE.NORM(α, σ, n)

Example: If you want a 95% confidence interval for a mean when the population standard deviation
is 10.2 from a sample of size 35, the margin of error would be

E = CONFIDENCE.NORM(0.05, 10.2, 35) = 3.3792


3

Chapter 7.3 - Estimating a Population Proportion


Here, Excel can calculate the critical value (zα/2 ) used in the margin of error defined by
s
p̂ q̂
E = zα/2 .
n
However, you must then complete the calculations to get the margin of error (E).

• Notation:

– E = the margin of error


– zα/2 = the critical value of z.
– p̂ is the sample proportion and q̂ = 1 − p̂.
– n is the sample size
– α = 1 − confidence level (in decimal form)
∗ If the confidence level is 90% then α = 1 − .90 = 0.10.
∗ If the confidence level is 95% then α = 1 − .95 = 0.05.
∗ If the confidence level is 99% then α = 1 − .99 = 0.005.

• Finding the critical value zα/2


Here we use the NORM.S.INV function.
NORM.S.INV stands for the inverse of the standard normal distribution (z-distribution).

General Usage: NORM.S.INV(area to the left of the critical value)


Specific Usage: zα/2 = NORM.S.INV (1 − α/2)

Example: If you want zα/2 for a 95% confidence interval, use

zα/2 = NORM.S.INV(0.975) = 1.960


4

Chapter 7.4 - Estimating a Population Mean (σ unknown)


Here, Excel can calculate the critical value (tα/2 ) and/or the margin of error (E) defined by
s
E = tα/2 √
n

• Notation:

– E = the margin of error


– tα/2 = the critical value of z.
– s is the sample standard deviation
– n is the sample size
– α = 1 − confidence level (in decimal form)
∗ If the confidence level is 90% then α = 1 − .90 = 0.10.
∗ If the confidence level is 95% then α = 1 − .95 = 0.05.
∗ If the confidence level is 99% then α = 1 − .99 = 0.005.

• Finding the critical value tα/2


Here we use the T.INV function.
T.INV stands for the inverse of the t-distribution.

General Usage: T.INV(area left of critical value, degrees of freedom)


Specific Usage: tα/2 = T.INV (1-α/2, df)

Example: If you want tα/2 for a 95% confidence interval based in a sample of size 20, use

tα/2 = T.INV(0.975, 19) = 2.093

• Finding the margin of error E


Here we use the CONFIDENCE.T function.
CONFIDENCE.T stands for the confidence interval from a t-distribution.

Usage: CONFIDENCE.T(α, s, n)

Example: If you want a 95% confidence interval for a mean with a sample standard deviation of 10.2
from a sample of size 35, the margin of error would be

E = CONFIDENCE.T(0.05, 10.2, 35) = 3.5038

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