Risk taking is an important part of investing. In order to make suitable investment decisions on behalf of their customers, portfolio managers give a questionnaireto new customers to measure their desire to take financial risks. The scores on the questionnaire are approximately normally distributed with a meanof 49.5 and a standard deviationof 16. The customers with scores in the bottom 15% are described as “risk averse.” What is the questionnaire score that separates customers who are considered risk averse from those who are not? Carry your intermediate computations to at least four decimal places. Round your answer to at least one decimal place.
Given: mu = 49.5, sigma = 16 and Area under the standard normal curve …
This solution shows all the steps for calculating the score on a questionnaire that must be achieved to distinguish them as risk averse based on the mean score and standard deviation.