I am considering two alternative investments. In both cases I am unsure about the percentage return but believe that my uncertainty can be represented by normal distributions with the means and standard deviations shown in the accompanying table. I want to make the investment that is more likely to produce a return of at least 10%. Which investment should I choose? Mean Standard Deviation Investment A Investment A 10.4 11.0 1.2 4.0
Inverse Normal Distribution
The method used for finding the corresponding z-critical value in a normal distribution using the known probability is said to be an inverse normal distribution. The inverse normal distribution is a continuous probability distribution with a family of two parameters.
Mean, Median, Mode
It is a descriptive summary of a data set. It can be defined by using some of the measures. The central tendencies do not provide information regarding individual data from the dataset. However, they give a summary of the data set. The central tendency or measure of central tendency is a central or typical value for a probability distribution.
Z-Scores
A z-score is a unit of measurement used in statistics to describe the position of a raw score in terms of its distance from the mean, measured with reference to standard deviation from the mean. Z-scores are useful in statistics because they allow comparison between two scores that belong to different normal distributions.
I am considering two alternative investments. In both cases I am unsure about the percentage return but believe that my uncertainty can be represented by
| Mean | Standard Deviation | |
|
Investment A Investment A |
10.4 11.0 |
1.2 4.0 |
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