CFA Practice Question

There are 434 practice questions for this study session.

CFA Practice Question

Suppose that the penalty for withdrawing funds early from a certain account follows a uniform distribution on the interval from (5%,12%). What is the probability that the penalty is less than 7%?

A. 0.286
B. 0.416
C. 0.714
Correct Answer: A

The probability that the penalty is less than 7% is F(7) = (7 - 5)/(12 - 5) = 0.286.

User Contributed Comments 7

User Comment
sabie don't understand...someone please explain
rufi there is formula x>=a, where prob=(x-a)/(b-a)
JKiro prob. of < 7% ..... looking for cumulative density fcn
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cumulative density fcn is given by
F(x) = 0 for x <= a
F(x) = (x-a)/(b-a) for a <= x <= b
F(x) = 1 for x >= b
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So... given that a = 5; b = 12;
F(4) = 0
F(7) = (7-5)/(12-5) = 0.2857
F(13) = 1
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Poorvi Thanks Jkiro!
johntan1979 Man, that is not supposed to be so difficult.

Range is 7, and less than 7% is 2, so 2/7=0.285714
Yrazzaq88 I think even without seeing the formula, it's quite obvious that it would be A). Less than 7, = 6% + 5%...
Ritu2204 Uniform distribution means probability is equal at each point. Now range is 12-5 i.e. 7.
We have to find value less than 7. It means cumulative probability till 7 but it starts from 5,as given. So 7-5 =2
Now u divide the desired range by total which is 2/7
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