Page 231 - BA2 Integrated Workbook STUDENT 2018

Risk 2: Probability

Mean

–3 –2 –1 0 1 2 3

Standard deviation

If we think of a standard normal distribution curve with three standard deviations, the
following will be true:

In general 68% of values are within one standard deviation (between –1 and 1),
95% of values are within two standard deviations (between –2 and 2) and 99.7%
of values are within three standard deviations (between –3 and 3).

From this we can see that if we look at a set of data which fits a normal distribution
the majority of values will occur closer to the mean, with fewer and fewer occurring
the further from the mean we move.

 If we know the mean and the standard deviation for a distribution we can work
out the percentage chance (probability) of a certain value occurring.

 As the curve is symmetrical, the values on the positive side will be exactly the
same as the values on the negative side.

 The percentage figures can be obtained using normal distribution tables, which
are given in your exam, and can be found at the front of this book.

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