I cant' seem to get any of these type of quant questions for the life of me!!!! PLEASE HELP!!!
PLEASE EXPLAIN THESE TYPES OF QUESTIONS
A group of investors wants to be sure to always earn at least a 5% rate of return on their investments. They are looking at an investment that has a normally distributed probability distribution with an expected rate of return of 10% and a standard deviation of 5%. The probability of meeting or exceeding the investors' desired return in any given year is closest to:
A) 34%.
B) 98%.
C) 84%.
Answer is C
The mean is 10% and the standard deviation is 5%. You want to know the probability of a return 5% or better. 10% - 5% = 5% , so 5% is one standard deviation less than the mean. Thirty-four percent of the observations are between the mean and one standard deviation on the down side. Fifty percent of the observations are greater than the mean. So the probability of a return 5% or higher is 34% + 50% = 84%.
PLEASE EXPLAIN THESE TYPES OF QUESTIONS |