CFA Practice Question

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CFA Practice Question

For x, a random variable from a normal distribution with mean 40 and standard deviation 5, P(x > 20) = ______ (to the nearest 0.1%).

A. 0+
B. 95%
C. 1-
Correct Answer: C

The z-score for 20 is (20 - 40)/5 = -4. Reading the normal table, the smallest entry is -3.09 and its value is 0.0010. So, P(x < 20) = 0+. Thus, P(x > 20) = 1 - 0+ = 1-. That is, when rounded to the nearest 0.1%, the answer is 100%, but because 1 holds a special place in probability (indicating a must-happen event), we report 1-.

User Contributed Comments 7

User Comment
magicchip well, it can not be any of the others...
z value of 1.00
ValeDeAcha Can someone tell me please in which page of the book do we find the "normal table"?
ebayer in every stats book you will find such tables as appendixes.
drb2234 So...anytime the question asks "x>20" - just as an example - you would subtract the z-score from 1?
cfaeater The Z-tables can be found in the appendices in the CFA book Ethical and Professional Standards and Quantitative Methods.
johntan1979 Just flip the arrow... both sides are symmetrical, meaning for P(x>20) is the same as P(x<60)
Huricane74 For P(x>20) with a std. dev. of negative 4, I was looking for a probability of 99.99% because it is not quite 100%.
I am going to hate questions like this on the CFA exam.
It sucks when you know the answer, and you still get it wrong.
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