Question

Builtrite has calculated the average cash flow to be $16,000 with a standard deviation of $4000. What is the probability of a cash flow being less than $9000? (Assume a normal distribution.) 4% 09% 41% 46%

Answer 1

Given about Builtrite,

Average cash flow u = $16000

standard deviation sd = $4000

for a cash flow of less than X = $9000, Z value is

Z = (X-u)/sd = (9000 - 16000)/4000 = -1.75

So, for Z less than -1.75, probability from the Z-table is 4%

So, probability of cash flow less than $9000 is 4%