Briefly, explain the relationship between confidence interval and hypothesis testing?

Briefly, explain the relationship between confidence interval and hypothesis testing?

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Briefly, explain the relationship between confidence interval and hypothesis testing?

Solution: There exist a close relationship between confidence interval and hypotheses testing. When constructing of 95% confidence interval, all values in the interval are considered plausible for the parameter being estimated. The values outside this interval are rejected as relatively implausible. If the value of the parameter specified by the null hypotheses is contained in the 95% interval, then the null hypothesis cannot be rejected at the level of 0.05 levels. If the value specified by the null hypothesis is not in the interval, then the null hypothesis can be rejected at the 0.05 level. If a 99% confidence interval is constructed, then values outside the interval are rejected at the 0.01 level.


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