Please explain why you would or would not think each of the following variables
ID: 3359383 • Letter: P
Question
Please explain why you would or would not think each of the following variables to be normally distributed.
- Credit scores of U.S. adults in 2017.
- Annual salary of workers in the U.S. in 2016.
- The 30-years fixed mortgage interest rates in the U.S. in 2017.
- Home prices in a given area in 2017.
- Please state an example each of normally distributed, left-skewed, and right-skewed variables and justify your answer.
Explanation / Answer
- Credit scores of U.S. adults in 2017.
We would not think that the credit scores of U.S. adults in 2017 follows a normal distribution because it is observed that the number of persons with low credit score is more and as credit score increases, the number of person decreases.
- Annual salary of workers in the U.S. in 2016.
We would think that the annual salary of workers in the U.S. in 2016 follows a normal distribution because the proportion of persons with less salary and high salary is low, while proportion of persons with average or middle salary is high.
- The 30-years fixed mortgage interest rates in the U.S. in 2017.
We would not think that the 30 years fixed mortgage interest rates in the U.S. in 2017 follows a normal distribution because we know that in general, the interest rates whether it increases or decreases but it don’t have any pattern. The rate of interest is mostly depends on the demand and supply theory.
- Home prices in a given area in 2017.
We would not think that the home prices in a given area in 2017 follows a normal distribution because the home prices are continuously increasing.
- Please state an example each of normally distributed, left-skewed, and right-skewed variables and justify your answer.
The IQ scores or GPA of the students are normally distributed. Household income in the U.S. is negatively skewed. Annual income of student after completion of degree is positively skewed.