Statistical

Inference
BBA-VB
Chapter 5
Standard Normal Distribution (Z-Distribution)
Dr Imtiaz Husain
 Definition:
• The standard normal distribution, also called the z-distribution, is a special
normal distribution where the mean is 0 and the standard deviation is 1.

We only need to know the mean and standard deviation of our distribution to find the z-score of a value.
Normal Distributions Calculations
The standard normal distribution table provides the probability that a
normally distributed random variable Z, with mean equal to 0 and
variance equal to 1, is less than or equal to z.
Diagrammatically, the probability of Z less than 'a' being Φ(a), as
determined from the standard normal distribution table, is shown
below:
Probability between z-values
• The key requirement to solve the probability between z-values is to
understand that the probability between z-values is the difference
between the probability of the greatest z-value and the lowest z-
value:
Standard Normal distribution
• Formula:
Finding probability using the z-distribution:
• Find the probability of SAT scores in the exam exceeding 1380, mean
of the distribution is 1150, and the standard deviation is 150. Find
the z-score.
Solution:
• The z-score tells us how many standard deviations away 1380 is from the mean (1150).

For a z-score of 1.53, the p-value is 0.937 (from Z-table).

This is the probability of SAT scores being 1380 or less (93.7%), and it’s the
area under the curve left of the shaded area.
• To find the shaded area, you take away 0.937 from 1, which is the
total area under the curve.
• Probability of x>1380 = 1 – 0.937 = 0.063
• That means it is likely that only 6.3% of SAT scores in your sample
exceed 1380.
Most graduate schools of business require applicants for admission to take the Graduate
Management Admission Council’s GMAT examination. Scores on the GMAT are roughly normally
distributed with a mean of 527 and a standard deviation of 112. What is the probability of an
individual scoring above 500 on the GMAT?
Solution:
Using Normal Distribution Formula:

µ = 527
σ = 112
Pr{X > 500} = Pr{Z > -0.24}
= 1 – 0.4052 = 0.5948
How high must an individual score on the
GMAT in order to score in the highest 5%?
Solution: x−
z=

x − 527
µ = 527 0.8289 =
112
σ = 112 0.8289(112) = x − 527
P(X > ?) = 0.05 92.8368 = x − 527
⇒ P(Z > ?)= 1 - 0.05 x = 92.8368 + 527
= 0.95 x = 619.8
⇒ Z = 0.8289
 The average number of acres burned by forest and range fires in a large New Mexico
county is 4,300 acres per year, with a standard deviation of 750 acres. The
distribution of the number of acres burned is normal. What is the probability that
between 2,500 and 4,200 acres will be burned in any given year?
Solution:
Normal Distribution

µ = 4300 P(2500 < X < 4200) = P(-2.40 < Z < -0.13)

σ = 750 P(-2.40 < Z < -0.13) = P(Z < -0.13) - P(Z < -2.40)
P(-2.40 < Z < -0.13) = 0.4483 - 0.0082 = 0.4401
What number of burnt acres corresponds to
the 38th percentile?
• µ = 4300
• σ = 750
• P(X < ?) = 0.38 ⇒ P(Z < ?) = 0.38 ⇒ Z = 0.6480
x−
z=

x − 4300
0.6480 =
750
0.6480 ( 750 ) = x − 4300

486 + 4300 = x
x = 4786
The Edwards’s Theater chain has studied its movie customers to determine how
much money they spend on concessions. The study revealed that the spending
distribution is approximately normally distributed with a mean of $4.11 and a
standard deviation of $1.37. What percentage of customers will spend less than
$3.00 on concessions?
• Solution:
x−
z=

 What spending amount corresponds to the
th
top 87 percentile?
Solution:
x−
z=

x = 4.86

x − 4.11
0.5517 =
1.37
0.5517 (1.37 ) = x − 4.11
0.755829 = x − 4.11
0.755829+4.11 = x
The length of life of an instrument produced by a machine has a normal distribution
with a mean of 12 months and standard deviation of 2 months. Find the probability
that an instrument produced by this machine will last
a) less than 7 months.
b) between 7 and 12 months.
Solution:  x −  7 − 12 
(a) P(x < 7) =  = 
  2 

P(z < -2.5) = ( Z = −2.5 )

= 0.0062
Remarks: There is a 0.62% chances that the instrument last less than 7 months.

b) P(7 < x < 12) = P(-2.5 < z < 0)

P(z<0) – P(z<-2.5)
0.5000 – 0.0062
= 0.4938
Remarks: There is 49.38 % chance that the instrument may last between 7 to 12
months period.
The time taken to assemble a car in a certain plant is a random variable having a
normal distribution of 20 hours and a standard deviation of 2 hours. What is the
probability that a car can be assembled at this plant in a period of time
a) less than 19.5 hours?
b) between 20 and 22 hours? x−
Solution: z=

19.5 − 20
(a) z=
2
z = −0.25
P(x < 19.5) = P(z < -0.25)
= 0.4013
There is 40.13% chance that this plant can assembled a car less than 19.5 hours.

b) P(20 < x < 22) = P(0 < z < 1)

= P(z<1) – P(z<0)
=0.8413 - 0.5000
= 0.3413
There is 34.13% chance that a car can assembled in this plant may take 20 to 22 hours.
The annual salaries of employees in a large company are approximately normally
distributed with a mean of $50,000 and a standard deviation of $20,000.
(a) What percent of people earn less than $40,000?
(b) What percent of people earn between $45,000 and $65,000?
(c) What percent of people earn more than $70,000?
Solution:
x−
(a) For x = 40000 z=

40000 − 50000 −10000 → z = -0.5
z= =
20000 20000
Area to the left (less than) of z = -0.5 is equal to 0.3085 = 30.85% earn less than $40,000.

(b) For x = 45000 , z = -0.25 and for x = 65000, z = 0.75

Area between z = -0.25 and z = 0.75 is equal to 0.3720 = 37.20 earn between $45,000 and
$65,000.

(c)For x = 70000, z = 1
Area to the right (higher) of z = 1 is equal to 0.1586 = 15.86% earn more than $70,000.
A large group of students took a test in Physics and the final grades have a mean of 70 and
a standard deviation of 10. If we can approximate the distribution of these grades by a
normal distribution, what percent of the students
a) scored higher than 80?
b) should pass the test (grades≥60)?
c) should fail the test (grades<60)?
Solution:
a) For x = 80, z = 1
Area to the right (higher than) z = 1 is equal to 0.1586 = 15.87% scored
more that 80.
b) For x = 60, z = -1
Area to the right of z = -1 is equal to 0.8413 = 84.13% should pass the
test.
c)100% - 84.13% = 15.87% should fail the test.
Thank You