The exam-style question in chapter 15 reads. A lump sum of $14,000 will be invested at time 0 for 4 years at a constant annual rate of interest i. (1+i) has a log-normal distribution with mean 1.05 and variance 0.007. What is the probability that the investment will accumulate to more than $20,000 in 4 years time. Now the problem I have is that when reading the question, my inclination would be that the log-normal distribution would have a mean of 1.05 and variance 0.007. However when consulting the solution I note that in fact the distribution of (1+i) has a mean of 1.05 and variance 0.007. Am I the only one that comes to the erroneous conclusion, or is the question stated wrongly?
Sorry Lindsay, I'm not picking up the difference between your two points: "my inclination would be that the log-normal distribution would have a mean of 1.05 and variance 0.007. However when consulting the solution I note that in fact the distribution of (1+i) has a mean of 1.05 and variance 0.007." Seems like you've said the same thing twice to me.
