Question

Builtrite has calculated the average cash flow to be $12,000 with a standard deviation of $4,500. What is the probability of a cash flow being greater than $9750? (Assume a normal distribution.) 30.85% 19.15% 80.85% 69.15%

Answer 1

Explanation:

Use the normcdf( function on a basic calculator as follows:

normcdf(-1000, 9750, 12000, 4500). Result: 0.307. This is the area under the standard normal curve to the left of 9750.

But we want the area under the standard normal curve to the right of 9750, so we subtract this 0.307 from 1.000, obtaining the desired result: 0.693. This roughly corresponds with the last of the given possible answers, 69.15%.