Question

Annual starting salaries for college graduates with degrees in business administration are generally expected to be between $39,000 and $54,000. Assume that a 95% confidence interval estimate of the population mean annual starting salary is desired. (Round your answers up to the nearest whole number.) What is the planning value for the population standard deviation

Answer 1

The planning value for the population standard deviation is $3750.

Explanation:

Empirical Rule:

The Empirical Rule states that, for a normally distributed random variable:

Approximately 68% of the measures are within 1 standard deviation of the mean.

Approximately 95% of the measures are within 2 standard deviations of the mean.

Approximately 99.7% of the measures are within 3 standard deviations of the mean.

95% confidence interval between $39,000 and $54,000.

This means that $39,000 is two standard deviations below the mean, and $54,000 is two standard deviations above the mean. This means that between $39,000 and $54,000 there are four standard deviations. So

`4\sigma = 54000 - 39000`

`4\sigma = 15000`

`\sigma = (15000)/(4)`

`\sigma = 3750`

The planning value for the population standard deviation is $3750.