00:01
So we are looking at a normal distribution.
00:02
I'll start by drawing it.
00:05
The total area under this curve is 1 or 100%, and it is symmetric.
00:12
Its mean, we know, is 6%.
00:15
I'll just put 6%.
00:19
It will be our units.
00:20
We don't know the standard deviation, that's what we're here to find out, but we do have an additional piece of information.
00:26
The probability of a positive return is 0 .9.
00:30
So 0 must be down here somewhere, so that the probability of getting a return above 0 .9, and below 0 .1.
00:41
Okay, so every normal distribution has the same basic shape.
00:45
They only differ in their centre, the mean, and how spread out there for standard deviation.
00:51
So i'm going to find the value on the standard normal curve that matches up to this cutoff point here.
00:58
The z school.
00:59
So i'm going to use my ti -84.
01:01
With the inverse normal function.
01:04
You can also use software like excel or a z score table...