If the mean P/E of 30 stocks in a certain industrial sector is 18 and the sample standard deviation is 3.5, standard error of the mean is CLOSEST to: | Financial Risk Manager Part 1 Quiz - LeetQuiz
Financial Risk Manager Part 1
Explanation:
Explanation
The standard error of the mean (SEM) is calculated using the formula:
SEM=ns
Where:
s = sample standard deviation = 3.5
n = sample size = 30
Substituting the values:
SEM=303.5=5.4773.5≈0.639
This value (0.639) is closest to 0.64 among the given options.
Key points:
Standard error measures the precision of the sample mean as an estimate of the population mean
It decreases as sample size increases
The formula assumes the sample is representative of the population
In this case, with n=30, we get SEM ≈ 0.64
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If the mean P/E of 30 stocks in a certain industrial sector is 18 and the sample standard deviation is 3.5, standard error of the mean is CLOSEST to: