Approximate Binomial Probabilities Using the Normal Distribution

question 51

Essay

Approximate Binomial Probabilities Using the Normal Distribution
-In a recent survey, 84% of the community favored building more parks in their neighborhood. You randomly select 18 citizens and ask each if he or she thinks the community needs more parks. Decide whether you can use the normal distribution to approximate the binomial distribution. If so, find the mean and standard deviation. If not, explain why.

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Definitions:

Risk Tolerance

An investor's ability or willingness to endure market volatility and bear the risk of losing money.

Asset Allocation

The strategy of dividing an investment portfolio across various asset categories, such as stocks, bonds, and cash to optimize risk and return.

Efficient Portfolio Frontier

A curve representing the set of portfolios that offer the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Specifying Asset Classes

The process of identifying distinct categories of assets, such as stocks, bonds, and real estate, based on their characteristics and functions in investment portfolios.