Before a new phone system was installed, the amount a company spent on personal calls followed a normal distribution with an average of $500 per month and a standard deviation of $50 per month. Refer to such expenses as PCE's (personal call expenses). Find the point in the distribution below which 2.5% of the PCE's fell.
A) $402.00
B) $598.00
C) $12.50
D) $487.50

Question

Quizplus · Accepted Answer

The z-score corresponding to a cumulative probability of 0.025 is -1.96. So, the point in the distribution below which 2.5% of the PCE's fell is $500 - 1.96 * $50 = $402.00.

Before a New Phone System Was Installed, the Amount a Company