LEARNING OBJECTIVES At the end of this lesson the students shall be able to: • illustrate probability distribution; • apply probability distribution concept to business scenarios and problems. As a manager, why would you be so interested in understanding probability distribution? SAMPLE PROBLEM Let’s consider an account receivable auditor examining customer accounts for a client. Past records indicate that the mean amount per account is $5,000 and that this particular random variable has a deviation of $1,000. 1. Employees of Williams Manufacturing are given the opportunity to have money deducted from their pay and deposited in a Christmas Club savings account at the Credit Union. Of all employees who participate as club members, 20 percent have $5 deducted per pay check, 33 percent have $10 deducted, 36 percent have $15 deducted, and 11 percent have $20 deducted. What is the expected value of a member’s deduction per pay check? 2. A financial analyst computed the return on stockholder’s equity for all the companies listed on the New York Stock Exchange. She found that the mean of this distribution was 10 percent, with a standard deviation of 5 percent. She is interested in examining further those companies whose return on stockholder’s equity is between 16 and 22 percent. Of the approximately 1,300 companies listed on the exchange, how many are of interest to her?