ĐẠI HỌC FPT CẦN THƠ

Chapter 6

The Normal Distribution and Other

Continuous Distributions

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Chapter 6

The Normal Distribution

and Other Continuous
Distributions

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 ĐẠI HỌC FPT CẦN THƠ

Objectives
In this chapter, you learn:
 To compute probabilities from the normal distribution.
 How to use the normal distribution to solve business
problems.
 To use the normal probability plot to determine whether a set
of data is approximately normally distributed.
 To compute probabilities from the uniform distribution.

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Online Topics

 Exponential Distribution: Section 6.5.

 Normal Approximation to the Binomial Distribution:

Section 6.6.

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Continuous Probability Distributions

 A continuous variable is a variable that can assume

any value on a continuum (can assume an
uncountable number of values):
– thickness of an item.
– time required to complete a task.
– temperature of a solution.
– height, in inches.
 These can potentially take on any value depending
only on the ability to precisely and accurately
measure.
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Continuous Probability Distributions Vary

By Shape

• Symmetrical • Symmetrical • Right skewed

• Bell-shaped • Also known as • Mean > Median
• Ranges from Rectangular • Ranges from
negative to Distribution zero to
positive infinity • Every value between positive infinity
the smallest & largest
is equally likely
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The Normal Distribution

‘Bell Shaped.’
 Symmetrical. . f(X)
 Mean, Median and Mode are
Equal.
Location is determined by the σ
mean, μ. X
Spread is determined by the μ
standard deviation, σ.
Mean
The random variable has an
infinite theoretical range: = Median
- to +. = Mode

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The Normal Distribution

Shape

f(X) Changing μ shifts the

distribution left or right.

Changing σ increases
or decreases the
σ spread.

μ X

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By varying the parameters μ and σ, we

obtain different normal distributions

A and B have the same mean but different standard deviations.

B and C have different means and different standard deviations.
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The Normal Distribution

Density Function

 The formula for the normal probability density function is:

2
1  (X μ) 
1   
2  
f(X)  e
2π
Where e = the mathematical constant approximated by 2.71828
π = the mathematical constant approximated by 3.14159
μ = the population mean
σ = the population standard deviation
X = any value of the continuous variable

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The Standardized Normal

 Any normal distribution (with any mean and
standard deviation combination) can be
transformed into the standardized normal
distribution (Z).

 To compute normal probabilities need to transform

X units into Z units.

 The standardized normal distribution (Z) has a

mean of 0 and a standard deviation of 1.

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Translation to the Standardized

Normal Distribution
 Translate from X to the standardized normal (the
“Z” distribution) by subtracting the mean of X and
dividing by its standard deviation:

X μ
Z
σ
The Z distribution always has mean = 0 and
standard deviation = 1.
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The Standardized
Normal Distribution
 Also known as the “Z” distribution.
 Mean is 0.
 Standard Deviation is 1.
f(Z)

1
Z
0
Values above the mean have positive Z-values.
Values below the mean have negative Z-values.

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The Standardized Normal Probability

Density Function
 The formula for the standardized normal probability
density function is:

1 (1/2)Z2
f(Z)  e
2π

Where e = the mathematical constant approximated by 2.71828

π = the mathematical constant approximated by 3.14159
Z = any value of the standardized normal distribution

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Example

 If X is distributed normally with mean of 100 and

standard deviation of 50, the Z value for X = 200
is:

X  μ $200  $100
Z   2.0
σ $50
 This says that X = 200 is two standard deviations
(2 increments of 50 units) above the mean of 100.

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Comparing X and Z units

100 200 X (μ = 100, σ = 50)

0 2.0 Z (μ = 0, σ = 1)

Note that the shape of the distribution is the same, only

the scale has changed. We can express the problem in
the original units of X or in standardized units (Z).

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Finding Normal Probabilities

Probability is measured by the area

under the curve.
f(X) P (a ≤ X ≤ b)
= P (a < X < b)
(Note that the
probability of any
individual value is zero.)

a b X

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Probability as
Area Under the Curve
The total area under the curve is 1.0, and the curve is
symmetric, so half is above the mean, half is below.

f(X) P(   X  μ)  0.5
P(μ  X   )  0.5

0.5 0.5

μ X
P(   X   )  1.0
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The Standardized Normal Table

The Cumulative Standardized Normal table in the

textbook (Appendix table E.2) gives the
probability less than a desired value of Z (i.e.,
from negative infinity to Z).

0.9772
Example:
P(Z < 2.00) = 0.9772

0 2.00 Z

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The Standardized Normal Table

(continued)

The column gives the value of

Z to the second decimal point.
Z 0.00 0.01 0.02 …

The row shows 0.0

the value of Z 0.1
. The value within the table
to the first .
decimal point. . gives the probability from
2.0 .9772 Z =   up to the desired
Z value.
2.0
P(Z < 2.00) = 0.9772

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General Procedure for Finding Normal

Probabilities

To find P(a < X < b) when X is distributed

normally:

 Draw the normal curve for the problem in

terms of X.

 Translate X-values to Z-values.

 Use the Standardized Normal Table.

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Finding Normal Probabilities

 Let X represent the time it takes (in seconds) to
download an image file from the internet.
 Suppose X is normal with a mean of 18.0 seconds
and a standard deviation of 5.0 seconds. Find P(X
< 18.6).

X
18.0
18.6

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Finding Normal Probabilities(continued)

 Let X represent the time it takes, in seconds to download an image file from the
internet.
 Suppose X is normal with a mean of 18.0 seconds and a standard deviation of
5.0 seconds. Find P(X < 18.6):

X  μ 18.6  18.0
Z   0.12
σ 5.0

μ = 18 μ=0
σ=5 σ=1

18 18.6 X 0 0.12 Z

P(X < 18.6) P(Z < 0.12)

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Solution: Finding P(Z < 0.12)

Standardized Normal Probability P(X < 18.6)

Table (Portion) = P(Z < 0.12)
Z .00 .01 .02 0.5478
0.0 .5000 .5040 .5080

0.1 .5398 .5438 .5478

0.2 .5793 .5832 .5871
Z
0.00
0.3 .6179 .6217 .6255
0.12

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Finding Normal
Upper Tail Probabilities
 Suppose X is normal with mean 18.0 and
standard deviation 5.0.
 Now Find P(X > 18.6).

X
18.0
18.6

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Finding Normal: Upper Tail Probabilities

(continued)
 Now Find P(X > 18.6).
P(X > 18.6) = P(Z > 0.12) = 1.0 - P(Z ≤ 0.12)
= 1.0 - 0.5478 = 0.4522

0.5478
1.000 1.0 - 0.5478
= 0.4522

Z Z
0 0
0.12 0.12

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Finding a Normal Probability Between

Two Values
 Suppose X is normal with mean 18.0 and
standard deviation 5.0. Find P(18 < X < 18.6).
Calculate Z-values:

X  μ 18  18
Z  0
σ 5
18 18.6 X
X  μ 18.6  18 0 0.12 Z
Z   0.12
σ 5 P(18 < X < 18.6)
= P(0 < Z < 0.12)

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Solution: Finding P(0 < Z < 0.12)

Standardized Normal Probability P(18 < X < 18.6)

Table (Portion) = P(0 < Z < 0.12)
= P(Z < 0.12) – P(Z ≤ 0)
Z .00 .01 .02 = 0.5478 - 0.5000 = 0.0478
0.0 .5000 .5040 .5080 0.0478
0.5000
0.1 .5398 .5438 .5478
0.2 .5793 .5832 .5871

0.3 .6179 .6217 .6255 Z

0.00
0.12
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Probabilities in the Lower Tail

 Suppose X is normal with mean 18.0 and

standard deviation 5.0.
 Now Find P(17.4 < X < 18).

X
18.0
17.4
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Probabilities in the Lower Tail

(continued)

Now Find P(17.4 < X < 18):

P(17.4 < X < 18)
= P(-0.12 < Z < 0) 0.0478
= P(Z < 0) – P(Z ≤ -0.12)
= 0.5000 - 0.4522 = 0.0478 0.4522

The Normal distribution is

symmetric, so this probability is
17.4 18.0 X
the same as P(0 < Z < 0.12). Z
-0.12 0

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Empirical Rule

What can we say about the distribution of values

around the mean? For any normal distribution:
f(X)

μ ± 1σ covers about 68.26%

of X’s.
σ σ

X
μ-1σ μ μ+1σ
68.26%
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The Empirical Rule

(continued)

 μ ± 2σ covers about 95.44% of X’s.

 μ ± 3σ covers about 99.73% of X’s.

2σ 2σ 3σ 3σ
μ x μ x

95.44% 99.73%

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Given a Normal Probability

Find the X Value
 Steps to find the X value for a known
probability:
1. Find the Z value for the known probability.
2. Convert to X units using the formula:

X  μ  Zσ

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Finding the X value for a Known (continued)

Probability
Example:
 Let X represent the time it takes (in seconds) to download an
image file from the internet.
 Suppose X is normal with mean 18.0 and standard deviation
5.0.
 Find X such that 20% of download times are less than X.

0.2000

? 18.0 X
? 0 Z

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Find the Z value for

20% in the Lower Tail
1. Find the Z value for the known probability
Standardized Normal Probability  20% area in the lower
Table (Portion) tail is consistent with a Z
Z … .03 .04 .05 value of -0.84.

-0.9 … .1762 .1736 .1711

0.2000
-0.8 … .2033 .2005 .1977
-0.7 … .2327 .2296 .2266
? 18.0 X
-0.84 0 Z

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Finding the X value

2. Convert to X units using the formula:

X  μ  Zσ
 18.0  (0.84)5.0
 13.8

So 20% of the values from a distribution

with mean 18.0 and standard deviation
5.0 are less than 13.80.

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Excel (left), JMP (right), & Minitab (bottom)

Templates For Computing Normal Probs.
X is normal with a mean of 7 and a standard deviation of 2 find:

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Evaluating Normality

 Not all continuous distributions are normal.

 It is important to evaluate how well the data set is
approximated by a normal distribution.
 Normally distributed data should approximate the
theoretical normal distribution:
– The normal distribution is bell shaped (symmetrical) where
the mean is equal to the median.
– The empirical rule applies to the normal distribution.
– The interquartile range of a normal distribution is 1.33
standard deviations.

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Evaluating Normality
(continued)
Comparing data characteristics to theoretical properties:
Construct charts or graphs:
– For small- or moderate-sized data sets, construct a stem-and-leaf display
or a boxplot to check for symmetry.
– For large data sets, does the histogram or polygon appear bell-shaped?
Compute descriptive summary measures
– Do the mean, median and mode have similar values?
– Is the interquartile range approximately 1.33σ?
– Is the range approximately 6σ?

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Evaluating Normality
(continued)

Comparing data characteristics to theoretical

properties:
 Observe the distribution of the data set:
– Do approximately 2/3 of the observations lie within mean ±1 standard
deviation?
– Do approximately 80% of the observations lie within mean ±1.28
standard deviations?
– Do approximately 95% of the observations lie within mean ±2
standard deviations?
 Evaluate normal probability plot:
– Is the normal probability plot approximately linear (i.e. a straight line)
with positive slope?

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Constructing
A Normal Probability Plot
 Normal probability plot:
– Arrange data into ordered array.
– Find corresponding standardized normal quantile
values (Z).
– Plot the pairs of points with observed data values
(X) on the vertical axis and the standardized
normal quantile values (Z) on the horizontal axis.
– Evaluate the plot for evidence of linearity.
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The Normal Probability Plot

Interpretation
A normal probability plot for data
from a normal distribution will be
approximately linear.

X
90

60

30

-2 -1 0 1 2 Z
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Normal Probability Plot

(continued)
Interpretation
Nonlinear plots indicate a deviation from normality.

Left-Skewed Normal Right-Skewed

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Evaluating Normality: Mutual Fund Returns

Boxplots For Returns: Excel (top), JMP (left), & Minitab (right)

The boxplot appears slightly left-skewed.

(The normal distribution is symmetric.)
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Evaluating Normality: Mutual Fund Returns

Distribution is approximately normal, or at most, slightly left-skewed

• The mean (7.91) is approximately the same as the median (8.09).

(In a normal distribution the mean and median are equal.)
• The boxplot is slightly left-skewed. (Normal Distribution is
symmetric.
• The interquartile range of 3.72 is approximately 1.23 standard
deviations. (In a normal distribution the interquartile range is 1.33
standard deviations.)
• The range of 18.72 is equal to 6.21 standard deviations. (In a
normal distribution the range is 6 standard deviations.)
• 68.75% of the observations are within 1 standard deviation of the
mean. (In a normal distribution this percentage is 68.26%.)
• 79.38% of the observations are within 1.28 standard deviations of
the mean. (In a normal distribution this percentage is 80%.)
• 94.58% of the observations are within 2 standard deviations of the
mean. (In a normal distribution this percentage is 95.44%.)
• The skewness statistic is -0.33 and the kurtosis statistic is 0.42.
(In a normal distribution, each of these statistics equals zero.)

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Evaluating Normality: Mutual Fund Returns

Excel, JMP, & Minitab normal probability plot for returns

Plot is close to a straight line and shows the distribution is approximately

normal. (A normal distribution appears as a straight line.)
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The Uniform Distribution

 The uniform distribution is a probability

distribution that has equal probabilities for
all possible outcomes of the random variable.

 Also called a rectangular distribution.

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The Uniform Distribution (continued)

The Continuous Uniform Distribution:

1
if a  X  b
ba
f(X) =

0 otherwise

where
f(X) = value of the density function at any X value
a = minimum value of X
b = maximum value of X

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Properties of the
Uniform Distribution
 The mean of a uniform distribution is:
ab
μ
2

 The standard deviation is:

(b - a)2
σ
12

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Uniform Distribution Example

Example: Uniform probability distribution

over the range 2 ≤ X ≤ 6:

1
f(X) = 6 - 2 = 0.25 for 2 ≤ X ≤ 6

f(X)
ab 26
μ  4
0.25 2 2

(b - a)2 (6 - 2)2
σ   1.1547
X 12 12
2 6

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Uniform Distribution Example

Example: Using the uniform probability

distribution to find P(3 ≤ X ≤ 5):

P(3 ≤ X ≤ 5) = (Base)(Height) = (2)(0.25) = 0.5

f(X)

0.25

2 3 4 5 6 X

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Chapter Summary

In this chapter we discussed:

 Computing probabilities from the normal distribution.
 Using the normal distribution to solve business problems.
 Using the normal probability plot to determine whether a set
of data is approximately normally distributed.
 Computing probabilities from the uniform distribution.

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