Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Standard Deviation percentage increase
- This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
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- April 15, 2021 at 12:17 pm #617730
Dear John,
Firstly thanks a lot for providing us with all these resources. Very appreciated.I am having issues understanding the tail end probability. I have looked at Ask the Tutor to see if this question was asked before but couldn’t find it. Apologies if it was.
ex: normal distributed with a mean of 8kg and st.dev of 0.02kg
(a) if items whose weight lies outside the range 7.985 – 8.035kg are deemed to be faulty, what % of products would be faulty.
* i have no problem with this part of the question, it is 26.67%.
I thought i should write section (a) too to give you the full scenario.My issue is with b and c (if b is found then c would make sense too)
(b) if it is required to reduce the % of items that are too heavy (with a weight over 8.035kg) to 2%, to what value must the mean be decreased, leaving all other factors unchanged.
(c) if required to reduce the % of items that are too light (with weight below 7.985kg) to 2%, to what value must the standard deviation be decreased, leaving all factors unchanged.
answer (b): The tail end probability of 2% corresponds to the table entry 48%, so the z value 2.05 so work back to calculate the mean 8.035-(2.05*0.02) = 7.994
What does not make sense to me is that isn’t the percentage of items which are heavier than 8.035kg is 4.01% with the current mean of 8kg? (0.5-0.4599)= 0.0401
isn’t this 4.01% the one that what we are trying to reduce to 2%?
I can’t get my head around the answer “the tail end probability of 2% corresponds to the table entry 48% so the z value is 2.05”
why is it 48%? is it because 50% – 2%=48%
Apologies if i am being silly here. I have watched your free lectures and they all made sense and I like the way you are “explaining” the formulas so they make “sense” to us. This is exactly what I really need here. I just couldn’t understand this answer; it just didnt make sense to me. Would you mind helping me understand it?
Thanks in advance
Regards
MiaApril 15, 2021 at 4:09 pm #617763Part (b) is asking to what value the mean needs to be changed (which is actually a rather ridiculous thing to ask because it is not normally in real life possible to change the mean!!).
For the weight to be over 8.035kg with a probability of 2%, then the probability of being between the new mean and 9.035kg must be 48% (because 50% must be above the new mean).
Working backwards in the tables, for a probability of 0.48, the z value must be 2.05.
Therefore the distance between the new mean and 8.035 must be 2.05 x the standard deviation.
April 15, 2021 at 4:41 pm #617769Everything makes sense when you explain it! Thanks very much! Really appreciated and thanks for replying.
April 16, 2021 at 8:59 am #617848You are welcome 🙂
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