Ch 15 Q 15.12

Discussion in 'CT1' started by Srijana Raghunath, Mar 8, 2016.

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  1. What is the difference between Q 15.10 and Q 15.12? Why do we have to calculate probability using standard normal distribution in Q 15.12 while we don't do so for Q 15.10?
     
  2. John Lee

    John Lee ActEd Tutor Staff Member

    Bit confused. Questions in Chapter 15 only go up to Q15.11.
     
  3. 9346776

    9346776 Member

    Question 15.10 the annual growth rate vary independently whilst the one in 15.12 does not.
     
  4. There is Qs 15.12..

    A lump sum of $14,000 will be invested at time 0 for 4 years at an annual rate of
    interest i . The interest rate, once determined, will be the same in each of the four years.
    1+ i has a log-normal distribution with mean 1.05 and variance 0.007. Calculate the
    probability that the investment will accumulate to more than $20,000 in 4 years’ time.
     
  5. I am not sure that is the reason...when u go to Part 4 Qs and As, there are problems which are similar to Q 15.10, but solved by standardizing..
     
  6. John Lee

    John Lee ActEd Tutor Staff Member

    Apologies, I was looking at 2015 notes not 2016.

    The difference is that in Q15.10 we are given the \(\mu\) and the \(\sigma^2\) whereas in Q15.12 we are given the mean and variance. Hence in Q15.12 you have to solve the equations to get the \(\mu\) and the \(\sigma^2\).
     
  7. Thank you...I get it now :)
     
  8. John Lee

    John Lee ActEd Tutor Staff Member

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