uestion 4 A bank offers three different savings accounts. Type A that yields 10%

Question

uestion 4 A bank offers three different savings accounts. Type A that yields 10% interest, Type B that yields 7% and Type C that yields 12% interest over each year. The amounts invested in each account at the sti year are independent and normally distributed random variables, with the following parameters (in mill Typeo A 3.0 0.6 B 1.5 0.8 C | 2.0 | 1.0 Assuming no other deposits or withdrawals are made, what is the 90th percentile of the distribution of amount of interest paid by the bank during the year (in millions)? A. 0.831 B. 0.845 C. 0.947 D. 1.219 E. 1.268

Explanation / Answer

here expected mean return=3*0*1+1.5*0.07+2*0.12=0.645

std deviaiton =((0.1*0.6)2+(0.07*0.8)2+(1*0.12)2)1/2 =0.145

for 90th percentile crtiical z score =1.28

threfore corresponding value =mean +z*std deviaiton =0.645+1.28*0.145=0.831.

option A is correct

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