Wednesday, April 29, 2009

Standard Deviation

When you ask people what standard deviation is, they say it defines the closeness of a set of values from its mean. Well, its true, but how close? OR what can you say for sure about how the values are dispersed w.r.t mean? Quantifying it is important. If you are not sure where you stand w.r.t application of STD deviation. This question is for you.

Lets say that you are a real estate guy. You want to buy plots of land[they are ridiculously priced, some too low and some too high]. There are hundred plots. Your aim is to capture atleast half of them so that you are the biggest real estate agent in the area.

However, you dont know what the price of each plot is. You are told that the mean price of each plot is $20K [K= Kilo] and the standard deviation is $5K

1) What is the minimum money you should carry so that you can be sure you can buy atleast half of the plots [50 plots].

2) If I choose the 50 cheapest plots, what can be the maximum value of the costliest plot?

3) If I choose to buy all the houses within $10K to $30K, how many houses am I considering here.

4) How many questions above relate directly to STD deviation?

P.S : Answer will be posted in comments section


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