Company January 1 ($) April 30 ($) Applied Materials 10.13 12.21 Bank of New Yor

Question

Company January 1 ($) April 30 ($) Applied Materials 10.13 12.21 Bank of New York 28.33 25.48 ChevronTexaco 73.97 66.10 Cisco Systems 16.30 19.32 Coco Cola 45.27 43.05 Comcast 16.88 15.46 Ford Motors 2.29 5.98 General Electric 16.20 12.65 Johnson & Johnson 59.83 52.36 JP Morgan Chase 31.53 33.00 Microsoft 19.44 20.26 Oracle 17.73 19.34 Pfiser 17.71 13.36 Philip Morris 43.51 36.18 Procter & Gamble 61.82 49.44 In early 2009, the US economy was in a Great Recession. How did that recession affect stock prices? In the File PRICECHANGE, we have data from 15 different companies with their price per share on January 1 and April 30 of 2009. 1.     Develop a solid hypothesis for the difference between mean prices for the two months. 2.     Develop a 95% confidence interval estimate for the change in prices between the two months. 3.     What was the percentage change in the mean price between the two months? 4.     If the trend in percentage change continued until the end of the year 2009, what would the price of these stocks be? Company January 1 ($) April 30 ($) Applied Materials 10.13 12.21 Bank of New York 28.33 25.48 ChevronTexaco 73.97 66.10 Cisco Systems 16.30 19.32 Coco Cola 45.27 43.05 Comcast 16.88 15.46 Ford Motors 2.29 5.98 General Electric 16.20 12.65 Johnson & Johnson 59.83 52.36 JP Morgan Chase 31.53 33.00 Microsoft 19.44 20.26 Oracle 17.73 19.34 Pfiser 17.71 13.36 Philip Morris 43.51 36.18 Procter & Gamble 61.82 49.44 In early 2009, the US economy was in a Great Recession. How did that recession affect stock prices? In the File PRICECHANGE, we have data from 15 different companies with their price per share on January 1 and April 30 of 2009. 1.     Develop a solid hypothesis for the difference between mean prices for the two months. 2.     Develop a 95% confidence interval estimate for the change in prices between the two months. 3.     What was the percentage change in the mean price between the two months? 4.     If the trend in percentage change continued until the end of the year 2009, what would the price of these stocks be?

Explanation / Answer

1. Here Hypothesises are

H0 : d = 0

Ha : d 0

where d is the mean difference in stock prices over these two months.

2. here the difference table is given below for the two month stock price difference

Here, Mean difference dbar = -2.45

standard deviation of differences sd = 4.7342

standard error of the mean difference sed = sd/sqrt(n) = 4.7342/sqrt(12) = 1.3667

90% confidence interval =  dbar +- tcritical sed = -2.45 +- 1.796 * 1.3667 = (-4.904, 0.004

Question 3

Percentage change in mean price between = dbar /x Jan 1,2009 * 100 = (-2.45) * 100/ 30.7293 = -7.973%

Question 4

if this trend will continue till year 2009, then the price of these stocks will be reduced by 100 - 100 * (100 - 7.973)3/1003 = 22.06%

Company January 1 ($) April 30 ($) Difference Applied Materials 10.13 12.21 2.08 Bank of New York 28.33 25.48 -2.85 ChevronTexaco 73.97 66.1 -7.87 Cisco Systems 16.3 19.32 3.02 Coco Cola 45.27 43.05 -2.22 Comcast 16.88 15.46 -1.42 Ford Motors 2.29 5.98 3.69 General Electric 16.2 12.65 -3.55 Johnson & Johnson 59.83 52.36 -7.47 JP Morgan Chase 31.53 33 1.47 Microsoft 19.44 20.26 0.82 Oracle 17.73 19.34 1.61 Pfiser 17.71 13.36 -4.35 Philip Morris 43.51 36.18 -7.33 Procter & Gamble 61.82 49.44 -12.38 Sum -36.75 Average -2.45 Std. dev. 4.734178

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