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The expected value of a normal distribution of prices for a stock is $66. If you...

The expected value of a normal distribution of prices for a stock is $66. If you are 99 percent sure that the price of the stock will be between $57 and $75, then what is the variance of the stock price? (Round answer to 3 decimal places, e.g. 52.750.)

Variance of Stock Price?

Solutions

Expert Solution

Here first we have to calculate standard deviation

At 99% confidence level Z score is = 2.576

Mean = 57 + 75 / 2 = 66

Z =( X- mean ) / standard deviation

X = random variable = 75

2.576 = (75 - 66) / Standard deviation

So , standard deviation = 3.493789

Variance = standard deviation^2

Variance = (3.493789)^2 = 12.207

jeff jeffy answered 2 years ago
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