The normal distribution is a theoretical distribution for a population. The distribution can be used to estimate how risky a cash flow or return is. If the mean is 12% and the standard deviation is 22.6%, what is the range of possible returns for a 2 standard deviation change and what percentage of all observations would fall within 2 standard deviations?

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For a 2 standard deviation change, the range of possible returns would be from -33.2% to 57.2% (mean - 2*SD to mean + 2*SD: 12% - 2*22.6% to 12% + 2*22.6%), which is a range of 90.4%, rounded to 90%. Approximately 95% (more precisely, 95.4%, but commonly rounded to 96%) of all observations fall within 2 standard deviations of the mean in a normal distribution.

The Normal Distribution Is a Theoretical Distribution for a Population