Quantitative Methods - NORMAL DISTRIBUTION

A portfolio has an expected mean return of 8% and standard deviation of 14%. The probability that its return falls between 8% and 11% is closest to:

  1. 8.5%.
  2. 14.8%.
  3. 58.3%.

A is correct. P (8% ≤ Portfolio return ≤ 11%) = N (Z corresponding to 11%) − N (Z corresponding to 8%). For the first term, NORM.S.DIST((11% − 8%)/14%) = 58.48%. To get the second term immediately, note that 8% is the mean, and for the normal distribution, 50% of the probability lies on either side of the mean. Therefore, N (Z corresponding to 8%) must equal 50%. So, P (8% ≤ Portfolio return ≤ 11%) = 0.5848 − 0.50 = 0.0848, or approximately 8.5%.

Can anyone help with this question ? Thank you very much !
I used Kaplan but I cant see any part explaining about this. I am utterly lost
And why is the solution using NORM.S.DIST ? Since on our BA II Plus we are unable to use this function?

To give greater scope for asking questions.

You won’t have weird numbers on the exam.

So meaning that these kind of questions wont come out on Exam ya ?

and thank you very much S2000magician for your prompt reply ! :slight_smile:
Have been studying CFA Level 1 with analystforum’s help and you are my lifesaver for my CFA journey :smiley: ! haha

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Meaning just that.

(Stipulation: if they do give you weird numbers, they’ll have to give you an excerpt from a standard normal distribution table.)

You are quite welcome.

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