- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 9. Common Probability Distributions
- Subject 5. The Binomial Distribution

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**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%?

B. 0.416

C. 0.714

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.

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**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 -------------------------------------------- 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 -------------------------------------------- So... given that a = 5; b = 12; F(4) = 0 F(7) = (7-5)/(12-5) = 0.2857 F(13) = 1 -------------------------------------------- |

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 |