Hi

I am confused on the answer for Q2 part A.

The Question:

Petra Munzi wants to know how value managers performed last year. Munzi

estimates that the population cross- sectional standard deviation of value manager returns is 4 percent and assumes that the returns are independent across

managers.

A. Munzi wants to build a 95 percent confidence interval for the mean return.

How large a random sample does Munzi need if she wants the 95 percent

confidence interval to have a total width of 1 percent?

The Answer:

I am confused as to how they arrived at the highlighted formula?

Could someone please explain this to me?

Thank you.