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An investment project is expected to earn $100,000 on average with a standard deviation of $50,000. Assume the earnings from this investment project is a normal distribution. What is the probability that you will lose money or earn nothing from this project

Respuesta :

Answer:

probability that you will lose money is 0.0228

Explanation:

given data

mean = $100,000

standard deviation = $50,000

solution

we get here probability that annual net cash flow will be negative as earn nothing

P(x< 0) = P ( [tex]\frac{x-\mu }{\sigma }[/tex] < [tex]\frac{0-100000}{50000}[/tex] )

and

P(x< 0) = P ( z < -2 )

P(x< 0) = 1 - P( z < 2 )

P(x< 0) = 1 - 0.9772

P(x< 0) = 0.0228

so probability that you will lose money is 0.0228

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