I have been encountering this qns in qbank and i cant seem to understand how to derive the ans.
An investment has a mean return of 15% and a standard deviation of returns equal to 10%. Which of the following statements is least accurate? The probability of obtaining a return:
A) greater than 25% is 0.32.
B) between 5% and 25% is 0.68.
C) greater than 35% is 0.025.
Your answer: A was correct!
Sixty-eight percent of all observations fall within +/- one standard deviation of the mean of a normal distribution.
Given a mean of 15 and a standard deviation of 10, the probability of having an actual observation fall within one standard deviation, between 5 and 25, is 68%.
The probability of an observation greater than 25 is half of the remaining 32%, or 16%. This is the same probability as an observation less than 5.
Because 95% of all observations will fall within 20 of the mean, the probability of an actual observation being greater than 35 is half of the remaining 5%, or 2.5%.
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In the explanation, it states:
Given a mean of 15 and a standard deviation of 10, the probability of having an actual observation fall within one standard deviation, between 5 and 25, is 68%.
How to get the 1 standard deviation using the mean of 15 and standard deviation of 10. Do i memorize or there is a way to calculate?
Thanks |