Question

4. The annual salaries of employees in a large company are approximately
normally distributed with a mean of $50,000 and a standard deviation of
$20,000:1
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

Answer 1

a. What percent of people earn less than $40000?

Solution: Let S be the random variable of a salary of employee (in $), S ~ N(50000,20000). Then the random

variable X =−50000

20000

~N(0,1).

( < 40000) = ( <

40000 − 50000

20000 ) = ( < −0.5) = (−0.5) = 0.3085375.

Here Φ(x) denotes the cumulative distribution function of a standard normal distribution.

Answer: 31%.

b. What percent of people earn between $45000 and $65000?

Solution:

(45000 < < 65000) = (

45000 − 50000

20000 < <

65000 − 50000

20000 ) = (−0.25 < < 0.75)

= (0.75) − (−0.25) = 0.7733726 − 0.4012937 = 0.3720789.

Answer: 37%.

c. What percent of people earn more than $70000?

Solution:

( > 70000) = ( >

70000 − 50000

20000 ) = ( > 1) = 0.8413447.

Answer: 84%.