SOLUTION: 5) The average stock price for companies making up the S&P 500 is $30, and the stan- dard deviation is $8.20 (BusinessWeek, Special Annual Issue, Spring 2003). Assume 1 the stoc

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Question 1198087: 5) The average stock price for companies making up the S&P 500 is $30, and the stan-
dard deviation is $8.20 (BusinessWeek, Special Annual Issue, Spring 2003). Assume
1
the stock prices are normally distributed.
a) What is the probability that a company will have a stock price of at least $40?
b) What is the probability that a company will have a stock price no higher than $20?
c) How high does a stock price have to be to put a company in the top 10%?
Answer by ewatrrr(24785)   (Show Source): You can put this solution on YOUR website!

Hi

µ = $30 and σ = $8.20  Continuous curve 

Using TI or similarly an inexpensive calculator like an Casio fx-115 ES plus

P(x ≥ 40) = normcdf(40,9999,8.2,30) = .1113

P(x < 20) =  P(x ≤ 20) = normcdf(-9999,20,8.2,30) = .1113

c) Top 10%, Invnorm(.90) = 1.282
x = 1.282*8.20 + 30 = 40.5
How high does a stock price have to be to put a company in the top 10%?
 Greater than $40.50

Important You feel comfortable Using Your calculator.
Wish You the Best in your Studies.


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