- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 9. Common Probability Distributions
- Subject 4. The Discrete Uniform 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%). Find the variance of the penalty.

B. 7%

C. 8.5%

A. 4.08%

B. 7%

C. 8.5%

Correct Answer: A

The variance is V(X) = (12 - 5)

^{2}/12 = 4.08%.###
**User Contributed Comments**
12

User |
Comment |
---|---|

standaert |
where do you get this formula? |

bublik |
There is no formula anywhere on this site. Anyway, it's V(X) = ((b-a)^2))/12 |

minna |
The formula's in the notes. |

mtcfa |
What the heck? This is about the 4th different calculation for variance I'v seen. |

grantw |
right. different distributions have different formulas to calculate variance! |

got2pass |
can someone tell me why the formula calls for dividing by 12? |

irinalm |
you can find derivation of variance here mash.dept.shef.ac.uk/Statistics/38_2_unifm_dist.pdf. it shows why it is 12. |

Shalva |
2irinalm: Thanks for the link |

Daddykay |
When i dont understand a formula, i just memorize it, i dont have time to be asking why the formula is like that etc. Besides, no question will require that you prove any formula, right folk?? |

anneki |
right big daddykay |

davidmort |
Use this book for this section |

eddington |
Actually 4.08%% |