Confidence Interval Excel

Confidence Interval Excel

In this video, we will explain how you can create a confidence interval in Excel. A confidence interval is a range of values that contains our population parameter or true value of a random variable with a certain probability, most often 95%.

0:00 Excel Confidence Interval 0:37 Excel Confidence Function 1:19 CONFIDENCE.NORM vs CONFIDENCE.T 2:36 CONFIDENCE Function Usage 3:24 Excel Descriptive Statistics Data Analysis

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First, we show how to use the CONFIDENCE function. For this function, we need several inputs among which alpha or the confidence level, the size of your sample, and the sample’s standard deviation. The confidence level is the level of accuracy of the confidence interval.

The other inputs for the function, the standard deviation, and sample size, are already computed on the sheet by using the COUNT function for the size and the STDEV.S function for the standard deviation.

We are ready to compute the confidence interval now. To do this, we type CONFIDENCE. As you can see, you can choose between CONFIDENCE.NORM and CONFIDENCE.T. When you work with small sample size, the normal distribution tends to underestimate the confidence interval. So, in that case, we go for the CONFIDENCE.T function which uses the t-distribution that has fatter tails than the normal distribution.

Note that the Central Limit Theorem implies that the sample means of large numbers of observations tend to be distributed normally, whatever the underlying distribution.

So, when we work with many observations, the confidence interval can be determined using the CONFIDENCE.NORM function. We are working with a large sample, 5000 observations, and you can see from the histogram on the screen that the underlying distribution approximates a normal distribution. So, here we can use the CONFIDENCE.NORM function without any doubt.

We select this function and enter the required parameters. First, we need to insert alpha, this is the 1 minus the confidence level. Next, we need the standard deviation which is computed in cell F4 and finally, we should insert the sample size into the function.

We type equals mean in cell F6 minus the confidence figure in F8 to compute the lower bound of the confidence interval. For the upper bound of the confidence interval, we type F6, the mean, plus F8, the confidence figure.

There is a second way to find the confidence figure. This can be done by navigating to Data, going to the Analysis tab, and select Data Analysis. When you click on Data Analysis, a menu opens where you select Descriptive Statistics and press OK.

The Descriptive Statistics menu opens where you first need to insert the input range. This is the Height variabl ... https://www.youtube.com/watch?v=njVjCQyjwjY