question of set 3 of practice exam 08, no.40

[itsyourz]

Hi, i asked so many question,,
i'm nearly frustrated after i scored practice exam
anyway

no.40 looks quite simple

but i can not understand what attached answer says

what percentage of this distribution (uniform) will be less than 1.96*SD above the mean which is zero

did i comprehend correctly?

i'm wondering where 1.12 came from and can not imagine how the distribution looks like

thanks

suk

 

[David Harper CFA FRM]

Hi suk,

Technically, the uniform distribution is not assigned on the 2008 FRM (it was last year, so this must be legacy)

But the distribution is flat (uniform) see http://en.wikipedia.org/wiki/Uniform_distribution_(continuous)
Here with [a,b] bounds of [-1,1]

And, you'll note the variance = (1 - (-1))^2/12 = variance of 0.3333. SQRT(variance) = 0.5777

So that 1.96 SD = (1.96)(0.577) = about + 1.12, but that is too far over to the right. The distribution ends at +1, so + 1.12 covers the entire distribution; i.e., CDF = 100%

David