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For 300 trading days, the daily closing price of a stock (in $) is well modeled...

For 300 trading days, the daily closing price of a stock (in $) is well modeled by a Normal model with mean $197.49197.49 and standard deviation $7.147.14. According to this model, what is the probability that on a randomly selected day in this period the stock price closed as follows.

a) above $211.77211.77?

b) below $204.63204.63?

c) between $183.21183.21 and $211.77211.77?

d) Which would be more unusual, a day on which the stock price closed above $210210 or below $190190?

Expert Solution

We are talking in the period of 300 days.

Let X represent the closing price of the stock. Then we have:

a)

We need to compute

The corresponding z-value needed to be computed is:

Therefore, we get that

b)

We need to compute

The corresponding z-value needed to be computed:

Therefore,

c)

d) The stock price ending above 210 is more unusual.

Case I

We need to compute . The corresponding z-value needed to be computed is:

Therefore, we get that

Case II

We need to compute

The corresponding z-value needed to be computed:

Therefore,

Please upvote. Let me know in the comments if anything is unclear. I will reply ASAP!

milcah answered 1 year ago

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