Fun with quant...

[bean]

An investment has an expected return of 10% with a standard deviation of 5%. If the returns are normally distributed, the chance of losing money is closest to:

A) 2.5%
B) 5.0%
C) 16.0%
D) 32.0%

 

[bean]

yep, feel free to share the calculation with others

 

[Dolomite]

stand dev of 5% = one stan dev.

so 0% return is 2 stan dev. away from the mean of 10% on the left side of the distribution.. 10% mean/5% stand dev = 2 stan devs.

and 95% of outcomes are btween +/- 2 stand dev.. so anything outside is 5% in total .. and so each half of the bell curve is 2.5%

 

[CFAHouston]

fun and quant shouldn't be used together in a sentence.

 

[jamespucyk]

That's the easy way, if you standardize the variable, though you get about 2.38% (off the top of my head, cus I did it before), but that would still be close to the right answer.