Standard Normal Concept

Managers often estimate the scope of investment project payoff possibilities to construct a range of optimistic to pessimistic scenarios. Once this has been done, the risk of a given course of action can be characterized in terms of the distribution of possible outcomes. The standard normal concept is an intuitive and practical means for assessing the dispersion of possible outcomes in terms of expected value and standard deviation measures.

normal distribution

Symmetrical distribution about the mean or expected value

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