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%). Find the variance of the penalty.

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%%
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