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Central Limit Thorem

1. The central limit theorem states that the sampling distribution of the sample mean approximates a normal distribution as the sample size increases, even if the population is not normally distributed. 2. It implies that the mean of the sampling distribution will equal the population mean and the sampling distribution will approach a normal distribution as the sample size increases. 3. This allows us to use sample statistics to make inferences about population parameters.

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46 views2 pages

Central Limit Thorem

1. The central limit theorem states that the sampling distribution of the sample mean approximates a normal distribution as the sample size increases, even if the population is not normally distributed. 2. It implies that the mean of the sampling distribution will equal the population mean and the sampling distribution will approach a normal distribution as the sample size increases. 3. This allows us to use sample statistics to make inferences about population parameters.

Uploaded by

KuldeepPaudel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Central limit theorem:

In selecting simple random samples of size n from a population, the sampling distribution of the sample
mean can be approximated by a normal distribution as the sample size becomes large where

Where = is standard error of sample mean

From the central limit theorem, we infer following

1. The mean of the sampling distribution will be equal to the population mean
2. The sampling distribution of the mean approaches normal distribution as sample size increases
3. It permits us to use sample statistics to make inference about population parameters.

Exercise
1. In a sample of 25 observation from a normal distribution with mean 98.6 and standard
deviation 17.2
A. What is
B. Find the corresponding probability given a sample of 36.
2. Mary Bartel, an auditor for a large credit card company, knows that , on average , the
monthly balance of any given customer is 112, and the standard deviation is 56.If Mary
audits 50 randomly selected accounts, what is a probability that the sample average
monthly balance is
A. Below $100
B. Between $100 and $130
3. In a normal distribution with mean 56 and standard deviation 21, how large a sample
must be taken so that there will be at least a 90% chance that its mean is greater than
52?
4. In a normal distribution with mean 375 and standard deviation 48, How large a sample
must be taken so that the probability will be at least 0.95 that the sample mean falls
between 370 and 380?
(NOTE: For more questions you may view page no 322 of Book 'Statistics for
management' by Richard I Levin)
5. During the festival time, a local bank has reported to the central bank that it’s saving
accounts have a mean balance of Rs. 1000 and a standard deviation of Rs. 240. In order
to assess the reliability of the mean balance reported by the bank, central bank auditors
have asked to randomly sample 64 of the local bank’s accounts. The auditors say they
will certify the bank’s report if the samples mean balance is in between Rs.940 to Rs.
1060. What is the probability that the auditors will not certify the bank’s report, even if
the mean balance really is Rs. 1000? (Assume the standard deviation reported by the
bank is accurate)
6. Monthly food expenditures for families of four in a large city average $ 420 with a
standard deviation of $80. Assuming the monthly food expenditures are normally
distributed, What is the probability that a randomly selected family will have monthly
expenditure between $250 and $450?
a. If many random samples of 36 families are selected. What is the probability that
sample means will have monthly expenditure between $250 and $450?
7. A chemist is testing a solvent to determine the average drying time of the plant .The population
of drying times for individual sample have an unknown population mean. A sample of n==25 will
be tested to determine drying times. The underlying population is of unlimited size. Find the
probability that the sample mean drying time deviates from the unknown population mean by no
more than one hour, assuming that the population standard deviation has the following values:
(1) 2 hour (2) 8 hour
8. A production process is checked periodically by a quality control inspector. The inspector selects
simple random samples of 30 finished products and computes the sample mean product weights.
If test results over a long period of time show that 5% of the values are over 2.1 pounds and 5%
are under 1.9 pounds, what are the mean and the standard deviation for the population of
products produced with this process?
9. The proportion of individuals insured by the All-Driver Automobile Insurance Company who
received at least one traffic ticket during a five-year period is .15.
What is the probability that the sample proportion will be within .03 of the population
proportion?
10. Advertisers contract with Internet service providers and search engines to place ads on websites.
They pay a fee based on the number of potential customers who click on their ad. Unfortunately, click
fraud—the practice of someone clicking on an ad solely for the purpose of driving up advertising revenue
—has become a problem. Forty percent of advertisers claim they have been a victim of click fraud
(Business Week, March 13, 2006). Suppose a simple random sample of 380 advertisers will be taken to
learn more about how they are affected by this practice.

a. What is the probability that the sample proportion will be within .04 of the population proportion
experiencing click fraud?

b. What is the probability that the sample proportion will be greater than .45?

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