CFA Practice Question

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CFA Practice Question

For the probability distribution shown below ______.

A. P(x < 5) = 95%
B. The expected value of x is 2.2
C. P(x > 2) = 40%
Correct Answer: B

Reading the chart, we get: P(x < 5) = 1 - P(x > 5) = 1 - [p(5) + p(6)] = 1 - [0.05 + 0.05]= 90%.
P(x > 2) = 1 - P(x < 2) = 1 - [p(0)+p(1)+p(2)] = 1 - [0.1 + 0.3 + 0.25] = 0.35 = 35%
Expected value = summation of x times p(x). Using the calculator, we get 2.2.

User Contributed Comments 11

User Comment
Janey Its easier if you find this answer using the weighted mean formula on your calculator
bahodir How to do it using BA II Plus pro?
StanleyMo hello Bahodir,

enter [2nd] then [data], then key in the value,
then enter [2nd] and [stat] , press up arrow key, done.
SuperM Please go into more detail with the using your calculator?
ravdo Please explain on HP12C as well.
JKiro using HP12c:
[f][REG][f][REG] <---- to clear the register
0.1[ENTER]0[*][+] <--- just showing the mechanics
0.3[ENTER]1[*][+] <--- begin here to save time
0.05[ENTER]6[*][+] ---> 2.2
note that the register remain UNCLEARED after each step
kmmcclanahan Or you can simply add up the probability that x>2 to be 35% and add up the probability that x<5 is 90% and just pick the only possible answer left. No need for a calculator on this.
cfaeater Does anyone know the detail on how to enter into the BAII?
Jurrens Using a HP12c is much easier, just use the sigma+ feature (pg 99 in the hp12c manual)
rsanfo For this question, calculator is not needed since A and C are false, but ...

BA II Plus
2ND, DATA (enter the data worksheet)
2ND, CLR WORK (clear the data worksheet)
Enter the values:
X01 = 1
Y01 = 0.3
2ND, SET (until LIN appears)
arrow up until <sum of x times y> appears
Answer is 2.2
birdperson good answer @rsanfo
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