Merrill Lynch Securities and Health Care Retirement Inc. are two large employers in downtown Toledo, Ohio. They are considering jointly offering child care for their employees. As a part of the feasibility study, they wish to estimate the mean weekly child care cost of their employees. A sample of 10 employees who use child care reveals the following amounts spent last week.$107 $92 $97 $95 $105 $101 $91 $99 $95 $104(a) Develop a 99 percent confidence interval for the population mean. Interpret the results.

Summation(x - mean) = (107 - 98.6)^2 + (92 - 98.6)^2 + (97 - 96.6)^2 + (95 - 98.6)^2 + (105 - 98.6)^2 + (101 - 98.6)^2 + (91 - 98.6)^2 + (99 - 98.6)^2 + (95 - 98.6)^2 + (104 - 98.6)^2 = 274

Standard deviation = √(274/10) = 5.23

The confidence interval is used to determine the range of values that could possibly contain a population parameter (population mean)

Confidence interval is written in the form,

(Point estimate - margin of error, Point estimate + margin of error)

The sample mean, x is the point estimate for the population mean.

We will use the t distribution because the sample size is small and the population standard deviation is not given.

Degree of freedom, df = 10 - 1 = 9

α = 1 - 0.99 = 0.01

z α/2 = 0.01/2 = 0.005

The area to the right of z 0.005 is 0.005 and the area to the left of z0.005 is 1 - 0.005 = 0.995. Using the t distribution table,

z = 3.25

Margin of error = z × s/√n

Where

s = sample standard Deviation = 5.23

Margin of error = 3.25 × 5.23/√10 = 5.38

Confidence interval = sample mean(point estimate) ± z × σ/√n

The lower boundary of the confidence interval is

98.6 - 5.38 = 93.22

The upper boundary of the confidence interval is

98.6 + 5.38 = 103.98

We estimate with 99% confidence that the mean weekly child care cost of their employees is between $93.22 and $103.98

Also,

99% of the confidence intervals constructed in this way would contain the true value for the population mean of mean weekly child care cost of their employees.