STATISTICS

Calculating the cost threshold value A risk manager wants to be 95% certain that costs will not exceed R2m. In other words, the risk manager is willing to tolerate at most a 5% probabilityr that costs will exceed R2m. Thus: a} If costs follow a normal distribution with an expected value of R1,6m and a standard deviation of R243 161 DR b] If costs follow a normal distribution with an expected value of R1,?m and a standard deviation of R300 000 Which set of costs meet the risk managers requirements? Calculate the cost threshold value for a} and b). given that a 5% chance is present that normally distributed costs will exceed a threshold lying 1,645 standard deviations above the expected value