Question of the Week
The correct answer is: D)
First, transform the actual value of this outcome (-1.2%) into its standardized z-score:
Zx= [(X - ux) ÷ σx] = [(-1.2 - 12.0) ÷ 8] = -1.65
Using the Normal Rule, candidates should realize that approximately 90% of the outcomes are expected to occur within 1.65 standard deviations of the mean. This would mean that 45% (half of 90%) of the observations must lie within the mean and -1.65 standard deviations away from the mean. If this is so, then 5% of all the observations must lie below -1.65 standard deviations away from the mean.