Question

Practical Application Scenario 1

Refer to the General Motors stock data. Using the same downloaded data, build a 95 percent confidence interval for the daily stock volume using your downloaded data. What does this confidence interval mean? Why might decision makers be interested in such an interval?

Instructions on how to download stock data:

Go to Yahoo! Finance, linked in Resources.

Find a stock beginning with the first letter of your last name. For example, if your last name begins with F, you might choose Ford.

Search your chosen stock. When you find it, click on the Historical Data tab to access historical stock price.

Gather five years of daily adjusted stock price data by selecting the appropriate dates through the Time Period link. Be sure the end date includes days in this course.

Click on the Download Data link to save the data to your computer. The file will be saved so that it can be opened in Excel.

Practical Application Scenario 2

To complete this scenario, use the Sample Size Estimator file provided in Resources.

For the stock you selected in Module 1, what size sample would you need to bracket the adjusted daily closing price within 50 cents (for example, a margin of error of 50 cents)? Use the standard deviation from your data for your calculations, and assume this standard deviation represents the population standard deviation.

Answer 1

General motors data from 30/08/2013 to 30/08/2018.

The summary of this data is

n = 1260

We need a 95% C.I. The sample mean is the center of confidence interval, so half of interval is to left of sample mean (47.5%) and the other half to the right of sample mean(47.5%). Using standard normal table we find area which most closely approximates 0.475 and set equal to corresponding z-score.

= 1.96

Lower Limit

Upper Limit

Confidence Interval is (14494557.75,15366907.17)

This implies that when a random sample is drawn from the population, we are 95% confident that it will lie in the range (14494557.75,15366907.17). The confidence interval for the mean helps you to estimate the true population mean and lets you avoid the additional effort that gathering a lot of extra data would require. You can compare the confidence interval you calculated with the target you were aiming for.

Scenario 2

For Adjusted closing price,

n= 1260

Mean = 31.88

Sd = 4.68

= 1.96

Margin of Error (E) = 50 cents =$ 0.5

We know,