Question

In: Statistics and Probability

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 $195.61 and standard deviation $7.15. According to this model, what cutoff value of price would separate the

a) lowest 11% of the days?

b) highest 0.86%?

c) middle 58%?

d) highest 50%?

Expert Solution

Let's consider X be the daily closing price of a stock.

Therefore,

a) The cutoff value of price would separate the lowest 11% of the days is given by

### by using z table, we find inverse distribution function.

Therefore the cutoff value for price is 204.4045

b) The cutoff value of price would separate the highest 0.86% is obtained by

By using z table

c) The cutoff value for middle 58% is obtained by

That is

By using z table

also

By using z table

Therefore the cutoff values are 182.168 and 199.5425

d) The cutoff value of price that would separate highest 50% is 195.61

Since X is normally distributed, 50% of score lies below the mean.

orchestra answered 3 years ago

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