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Financial Risk Manager Part 1

Financial Risk Manager Part 1


Explanation:

The 25th percentile is the value of xxx for which P(X≤x)P(X \leq x)P(X≤x) is greater than or equal to 0.25 and P(X≥x)P(X \geq x)P(X≥x) is greater than or equal to 0.75.

First, we need to find K. Since the probabilities must sum to 1: ‘`‘0.15 + 0.25 + 0.35 + K = 1$$ $$0.75` + K = 1 K = 0.25$$

Now we calculate cumulative probabilities:

  • P(X≤1)=0.15P(X \leq 1) = 0.15P(X≤1)=0.15
  • P(X≤2)=0.15+0.25=0.40P(X \leq 2) = 0.15 + 0.25 = 0.40P(X≤2)=0.15+0.25=0.40
  • P(X≤3)=0.15+0.25+0.35=0.75P(X \leq 3) = 0.15 + 0.25 + 0.35 = 0.75P(X≤3)=0.15+0.25+0.35=0.75
  • P(X≤4)=1P(X \leq 4) = 1P(X≤4)=1

For the 25th percentile:

  • P(X≤2)=0.40≥0.25P(X \leq 2) = 0.40 \geq 0.25P(X≤2)=0.40≥0.25
  • P(X≥2)=0.25+0.35+0.25=0.85≥0.75P(X \geq 2) = 0.25 + 0.35 + 0.25 = 0.85 \geq 0.75P(X≥2)=0.25+0.35+0.25=0.85≥0.75

Both conditions are satisfied for x=2x = 2x=2, so the 25th percentile is 2.0.

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Let X have the following probability density function:

fX(x)={0.15x=10.25x=20.35x=3Kx=4f_X(x) = \begin{cases} 0.15 & x = 1 \\ 0.25 & x = 2 \\ 0.35 & x = 3 \\ K & x = 4 \end{cases}fX​(x)=⎩⎨⎧​0.150.250.35K​x=1x=2x=3x=4​

Calculate the 25th percentile of the distribution.

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NNikitesh
Last updated: February 2, 2026 at 10:22
0

    A

    1.5

    0.0%

    B

    2.0

    100.0%

    C

    2.5


    D

    3.0

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