International University IU

STATISTICS FOR BUSINESS [IUBA]

CHAPTER 04

THE NORMAL DISTRIBUTION

Standard Normal Distribution Normal Distribution

~ ( , ) ~ ( , )

PART I

Finding probabilities of the normal distribution with given values

Statistics for Business | Chapter 04: The Normal Distribution

Step 01: Use the following formula to transform the normal random variable ,
where ~( , ) into the standard normal random variable , where
~(0, 1 ).

Step 02: Use the calculator or Table 2 (Areas of Standard Normal Distribution) in
Appendix C to compute the probabilities (or areas) of the normal
distribution based on the standard normal distribution.

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CALCULATOR INSTRUCTIONS FOR STATISTICS

Note: This page is only relevant for CASIO scientific calculator fx-570ES and fx-570ES PLUS

(Chapter 04 | The Normal Distribution)

Step No.01: Press MODE 3: STAT [ AC ]

Step No.02: Press SHIFT + 1 | [ STAT ] 7: DISTR

For CASIO scientific calculator fx-570ES: Press 7: DISTR

For CASIO scientific calculator fx-570ES PLUS: Press 5: DISTR

After that, the calculator will show you 4 available symbols.

However, we just pay attention to the first three ones.

1:P( 2:Q( 3:R(

+ We use [ 1 : P ( ] to compute the probability between the

standard normal random variable to , or ( < )

+ We use [ 2 : Q ( ] to compute the probability between the

Statistics for Business | Chapter 04: The Normal Distribution

standard normal random variable to the mean or (0 < < ).

+ We use [ 3 : R ( ] to compute the probability between the

standard normal random variable to +. ( > )

Step No.03: Press [ = ] to get the result.

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Example | Part 1:

(Case of finding probabilities of the normal distribution with given values)

PROBLEM:

A psychologist has devised a stress test for dental patients sitting in the waiting rooms.
According to this test, the stress scores (on a scale of 1 to 10) for patients waiting for root canal
treatments are found to be approximately normally distributed with a mean of 7.59 and a
standard deviation of 0.73.

a. What percentage of such patients have a stress score lower than 6.0?

SOLUTION: = 7.59, = 0.73

. .
Step 01: ( < 6.0) = < = ( < 2.1781)
.

Step 02: MODE 3 : STAT [ AC ]

SHIFT + 1| [STAT] 7 : DISTR 1 : P (-2.1781)

Statistics for Business | Chapter 04: The Normal Distribution

Then, press [ = ] to get the result ( . )= .

Summing up, ( < 6.0) = ( < 2.1781) = 0.0147

b. What is the probability that a randomly selected root canal patient sitting in the waiting
room has a stress score between 7.0 and 8.0?

SOLUTION: = 7.59, = 0.73

. . . .
Step 01: (7.0 < < 8.0) = < <
. .

= 0.8082 < < 0.5616)

Step 02: (There are three different methods of using the pocket calculator
to solve the problem of calculating the probability between two
given values. You can use only one of three following methods
that depends on your choice, not all of them, since each of them
always provides the same result with others)

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METHODS 01: Using 1 : P (

MODE 3 : STAT [ AC ]

SHIFT + 1| [STAT] 7 : DISTR 1 : P (0.5616)

[]

SHIFT + 1| [STAT] 7 : DISTR 1 : P (-0.8082)

Then, press [ = ] to get the result

( . ) ( . )= .

METHODS 02: Using 3 : R (

MODE 3 : STAT [ AC ]

SHIFT + 1| [STAT] 7 : DISTR 3 : R (-0.8082)

[]

Statistics for Business | Chapter 04: The Normal Distribution

SHIFT + 1| [STAT] 7 : DISTR 3 : R (0.5616)

Then, press [ = ] to get the result

( . ) ( . )= .

METHODS 03: Using 2 : Q (

MODE 3 : STAT [ AC ]

SHIFT + 1| [STAT] 7 : DISTR 2 : Q (-0.8082)

[+]

SHIFT + 1| [STAT] 7 : DISTR 2 : Q (0.5616)

Then, press [ = ] to get the result

( . )+ ( . )= .

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Summing up,

(7.0 < < 8.0) = (0.8082 < < 0.5616) = 0.5033

c. The psychologist suggests that any patient with a stress score of 9.0 or higher should be given
a sedative prior to treatment. What percentage of patients waiting for root canal treatments
would need a sedative if this suggestion is accepted?

SOLUTION: = 7.59, = 0.73

( . .
Step 01: ( 9.0) = = ( 1.9315)
.

Step 02: MODE 3 : STAT [ AC ]

SHIFT + 1| [STAT] 7 : DISTR 3 : R (1.9315)

Then, press [ = ] to get the result ( . )= .

Summing up, ( > 9.0) = ( > 1.9315) = 0.0267

Statistics for Business | Chapter 04: The Normal Distribution

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PART II

Finding the values of X given a probability

Step 01: The probability that a normal random variable will be above (below, or
symmetric) its mean a certain number of standard deviations is exactly
equal to the probability that the standard normal random variable will be
above (below, or symmetric) its mean the same number of (its) standard
deviations.

In particular, ( > )= ( > )

( < )= ( < )

( < < ) = ( < < )

Step 02: Find TA (Table Area)

(Table Area TA for a point of the standard normal distribution is the area

Statistics for Business | Chapter 04: The Normal Distribution

given in the standard normal probability table of Table 2 in Appendix C
under the standard normal curve between 0 and point > 0)

In particular,

For ( > ):

If ( > ) < 0.5, = . ( > )

If ( > ) > 0.5, = ( > ) .

For ( < ):

If ( < ) < 0.5, = . ( < )

If ( < ) > 0.5, = ( < ) .

For ( < < ), = ( < < )/

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Step 03: Look inside Table 2 (Areas of the Standard Normal Distribution) in
Appendix E for the values of corresponding to TA.

Step 04: Use the following formula to transform the standard normal random
variable to the normal random variable

=
In particular,

For ( > ):

If ( > ) < 0.5, the value of will be positive, or +

If ( > ) > 0.5, the value of will be negative, or

For ( < ):

If ( < ) < 0.5, the value of will be negative, or

Statistics for Business | Chapter 04: The Normal Distribution

If ( < ) > 0.5, the value of will be positive, or +

For ( < < ), the values of will include negative and positive
value, or and +

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Example | Part 2:

(Finding the values of X given a probability)

PROBLEM 01:

If X is a normally distributed random variable with mean 120 and standard deviation 44, nd a
value x such that the probability that X will be less than x is 0.56.

SOLUTION: We have ~ (120, 44 )

Step 01: We are looking for the value of the random variable such that
( < ) = . . In order to find it, we look for the value of the
standard normal deviation such that ( < ) = . .

Step 02: If the area to the left of is equal to 0.56, the area between 0 and (the
Table Area) is equal to

Statistics for Business | Chapter 04: The Normal Distribution

= . . = . .

Step 03: We look inside Table 2 (Areas of Standard Normal Distribution) in

Appendix C for the value corresponding to = 0.06 and find
= 0.15 (actually, = 0.0596, which is close enough to 0.06).

Step 04: We need to find the appropriate value. Here we use the following
equation.

= + = +( . )( )= .

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PROBLEM 02:

For a normal random variable with mean 19,500 and standard deviation 400, nd a point of the
distribution such that the probability that the random variable will exceed this value is 0.02.

SOLUTION: = 19,500, = 400

( > ) = ( > ) = 0.02

= 0.5 0.02 = 0.48

= 2.05

Thus, = + = 19,500 + (2.05)(400) = 20,320

PROBLEM 03

For ~ (32, 7 ), nd two values and , symmetrically lying on each side of the mean,
with ( < < ) = 0.99.

SOLUTION: = 32, =7

Statistics for Business | Chapter 04: The Normal Distribution

( < < ) = ( < < ) = 0.99

= 0.99/2 = 0.495

= 2.576

Thus, = + ( ) = 32 + (2.576)(7) = 13.968

= + ( ) = 32 + (2.576)(7) = 50.032

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PART III

The Normal Approximation to the Binomial Distribution

When the number of trials in a binomial distribution is large (> 100), the calculation of
probabilities become difficult for the pocket calculator. Fortunately, the binomial distribution as
increases and therefore we can approximate it as normal distribution.

Condition:

Normal Distribution as an Approximation to Binomial Distribution

Usually, the normal distribution is used as an approximation to the binomial distribution

when and (1 ) are both greater than 5that is, when

> 5 and ( ) > 5

Step 1: Compute and for the binomial distribution.

Statistics for Business | Chapter 04: The Normal Distribution

= ( )

Step 2: Convert the discrete random variable into a continuous random variable.

Continuity Correction Factor

The addition of .5 and/or subtraction of .5 from the value(s) of when the normal distribution
is used as an approximation to the binomial distribution, where is the number of successes in
trials, is called the continuity correction factor.

Therefore, when we calculate the binomial probability of an interval, we should subtract

0.5 from the left limit and add 0.5 to the right limit to get the corresponding normal
probability.

In particular,

> , .

< , .

= , . .

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where = a normal variable with mean and standard deviation

= a given value

Step 3: Compute the required probability using the normal distribution.

Example | Part 3:

(The Normal Approximation to the Binomial Distribution)

PROBLEM:

CASIO Vietnam makes calculators. Consumer satisfaction is one of the top priorities of the
companys management. The company guarantees the refund of money or a replacement for
any calculator that malfunctions within two years from the date of purchase. It is known from
past data that despite all efforts, 5% of the calculators manufactured by this company

Statistics for Business | Chapter 04: The Normal Distribution

malfunction within a 2-year period. The company recently mailed 500 such calculators to its
customers.

a. Find the probability that exactly 29 of the 500 calculators will be returned for refund or
replacement within a 2-year period.

SOLUTION:

Step 1: Compute and for the binomial distribution.

= = 500 0.05 = 25

95
= (1 ) = 500 0.05 0.95 = 4.8734
2

Step 2: Convert the discrete random variable into a continuous random variable.

To make the continuity correction, we subtract 0.5 from 29 and add 0.5 to 29, which gives the
interval 28.5 to 29.5 to obtain the value 29. Thus, ( = 29) for the binomial problem will be
approximately equal to (28.5 29.5) for the normal distribution.

Step 3: Compute the required probability using the normal distribution.

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28.5 25 29.5 25
(28.5 29.5) =
95 95
2 2

795 995
= (0.7182 0.9234) = 0.0584
95 95

Thus, based on the normal approximation, the probability that exactly 29 of the 500 calculators
will be returned for refund or replacement within a 2-year period is approximately 0.0584

b. What is the probability that 27 or more of the 500 calculators will be returned for refund or
replacement within a 2-year period?

SOLUTION:

Step 1: Compute and for the binomial distribution.

= = 500 0.05 = 25

95

Statistics for Business | Chapter 04: The Normal Distribution

= (1 ) = 500 0.05 0.95 = 4.8734
2

Step 2: Convert the discrete random variable into a continuous random variable.

For the continuity correction, we subtract 0.5 from 27, which gives 26.5 to obtain the value 27.
Thus, ( 27) for the binomial problem will be approximately equal to ( 26.5) for the
normal distribution.

Step 3: Compute the required probability using the normal distribution.

26.5 25
( 26.5) =
95
2

395
= ( 0.3078) = 0.3791
95

Thus, based on the normal approximation, the probability that 27 or more of the 500
calculators will be returned for refund or replacement within a 2-year period is approximately
0.3791

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c. What is the probability that 15 to 22 of the 500 calculators will be returned for refund or
replacement within a 2-year period?

SOLUTION:

Step 1: Compute and for the binomial distribution.

= = 500 0.05 = 25

95
= (1 ) = 500 0.05 0.95 = 4.8734
2

Step 2: Convert the discrete random variable into a continuous random variable.

For the continuity correction, we subtract 0.5 from 15 and add 0.5 to 22, which gives the
interval 14.5 to 22.5 to obtain the interval 15 to 22. Thus, (15 22) for the binomial
problem will be approximately equal to (14.5 22.5) for the normal distribution.

Step 3: Compute the required probability using the normal distribution.

14.5 25 22.5 25
(14.5 22.5) =
95 95

Statistics for Business | Chapter 04: The Normal Distribution

2 2

2195 95
= (2.1546 0.5130) = 0.2884
95 91

Thus, based on the normal approximation, the probability that 15 to 22 of the 500 calculators
will be returned for refund or replacement within a 2-year period is approximately 0.2884

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