A Confidence Interval Refers to a Parameter, or Population Characteristic

question 71

Short Answer

A confidence interval refers to a parameter, or population characteristic, whose value is fixed but unknown to us. In contrast, a future value of Y is not a parameter but instead a random variable; for this reason we refer to an interval of plausible values for a future Y as a __________ rather than a confidence interval.

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Definitions:

Stated Annual Percentage Rate

The nominal interest rate stated by financial institutions, not accounting for compounding or fees, on products like loans or savings accounts.

Daily Compounding

The process of calculating interest on both the initial principal and the accumulated interest from previous periods on a daily basis.

EAR

Effective Annual Rate; the real return on an investment, taking into account the effect of compounding interest.

APR

Annual Percentage Rate, representing the yearly interest rate charged on borrowed money.