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# Standard deviation! Watch

1. Standard deviation

Definition: measures the spread of data around it’s mean

Formula: N-1 is used instead of N because it removes bias and was imposed by bessel.

Example 1)
There is a client who is considering selling his business and wants to know if it’s worth keeping.

If the clients monthly income is 7200, 6500, 7500, 4020, 5300 for Jan, Feb, March, April and June respectively.

The clients wants to know how likely it is for his business to make over 6000 a month based on this years earnings.
Monthly Income---Mean – 6104, xi – mean:-----(xi-mean)2
7200---------- 1096 ---------------------- 1201216
6500---------- 396 ---------------------- 156816
7500---------- 1396 ---------------------- 1948816
4020---------- -2084 --------------------- 4343056
5300---------- -804 ---------------------- 646416

Standard deviation = 1440.17 and mean 6104
Using normal distribution

So P(X?6000)
P(Z?(6000 – 6104)/1440.17) = P(Z?-0.07) = P(Z?0.07) = 52.79% (using table above)
So there is a 52.79% chance of him earning over 6000 a month.

IS THIS VALID!!! IM NOT SURE IF YOU ARE ALLOWED TO USE NORMAL DISTRIBUTION IN THIS CASE!!!

For my method I am using bessels correction, which uses N-1 as opposed to N because this reduces bias in the final figure.
Is this method valid to use?
2. Maybe you should post this in the maths section.
3. It's as easy as ABC.
4. standard deviation is a load of nonsense.
5. I was going to ignore this thread, but that last exclamation mark made me think twice. It let me see that this thread really is important. Obviously I'm not going to give you an answer, I'm just going to mock your wildly inappropriate use of exclamation marks.

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Updated: December 16, 2010
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