Data Analysis with Microsoft Excel: Updated for Office 2007

Chapter 6 Statistical Inference 229

Figure 6-3

Using Excel

to calculate

a confidence

interval

8 Close your workbook. You do not have to save the changes.

Excel returns a 90% confidence band ranging from $5,267.38 to

$5,732.62. If you were trying to estimate the mean cost of this procedure for

all hospitals, you could state that you were 90% confi dent that the cost was

not less than $5,267.38 or more than $5,732.62.

Interpreting the Confi dence Interval

It’s important that you understand what is meant by statistical confi dence.

When you calculated the confi dence interval for the cost of the hospital pro-

cedure, you were not stating that the probability of the mean cost falling be-

tween $5,267.38 and $5,732.62 was .90. That would incorrectly imply that

the range you calculated and the mean cost are random variables. They’re

not. After drawing a specifi c sample and from that sample calculating the

confidence interval, we’re no longer working with random variables but

with actual observations. The mean cost is also some fi xed (but unknown)

number and is not random. The term confi dence refers to our confi dence

in the procedure we used to calculate the range. The term 90% confi dent

means that we are confi dent that our procedure will capture the value of m

90% of the times it is used.

CONCEPT TUTORIALS

The Confi dence Interval

To get a visual picture of the confi dence interval in action, you can use the

Explore workbook named Confidence Intervals to read about, and work

with, a confi dence interval.

To use the Confi dence Intervals workbook:

1 Open the Confidence Intervals workbook located in the Explore

folder. Enable any macros in the workbook.

2 Move through the sheets in this workbook, viewing the material on

z values and confi dence intervals.