CFA Practice Question

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CFA Practice Question

For the MRC test, with scores normally distribution with m = 70 and s = 5, the cutoff for the bottom 10% is ______.

A. 60
B. 68.72
C. 63.6
Correct Answer: C

We start by looking in the middle of the table for 0.1. The row and column values are -1.2 and 0.08. So, the x-score that is 1.26 standard deviations below the mean cuts off the bottom 10%. This x-score, 70 - 1.28(5), is 63.6. Note that P(x < 63.6) = 0.1.

User Contributed Comments 11

User Comment
kaliokale See, even analyst needs to use the a table
RichardWang We just need to remember some key numbers:
68% falls within 1 standard deviation -/+ mean;
95% falls within 2 standard deviation -/+ mean.
Thus bottom 10% cut off will be more than 1 standard deviation and less than 2 standard deviation under mean.
Only Answer C falls into this range.
(Answer A is 2 standard deviation under mean - too far;
Answer B is less than 1 deviation under meam - too little.)
tanyak Also, how about 70*.9 = 63 - would that work?
Rotigga We know that 80% CI is 1.282 std devs from the mean. Which means two tails, each with 10%. You should memorize the 80% CI of 1.282:
MBandekar the bottom point is 70-5 = 65
10% of this is 6.5
therefore the bottom 10% cutoff is 70-6.5=63.5...
This is approach right??
chamad Rottiga approach is saver..Not sure about MBandekar's! can you elaborate your approach?
Yurik74 Rottiga - I love that assumption that we know 80%CI is 1.282! I just love it : )))
Yurik74 tanyak & MBandekar - no, wrong approach, checked with other m and s, global discrepency
sgossett86 normal dist 90% confidence 1.68
we need 80% confidence so i did -(8/9)*(1.68)*(5)+70 to ballpark it
degosan9 Totally lost on this one even with everyone's comments
siancolli 80% of the data lies between -1.28 and 1.28 standard deviations from the mean. The question is referring to the bottom 10% (-1.28 standard deviations from the mean). So using the z formula: [-1.28*5] + 70 = 63.6
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