Question 5 (15 marks) For the 600 trading days from January 2011 through May 201

Question

Question 5 (15 marks) For the 600 trading days from January 2011 through May 2013, the daily closing price of TD Canada Trust stock (in $CAD) is well modelled by a Normal model with a mean of $79.80 and a standard deviation of $3.75. Calculate the following probabilities and stock prices using the Empirical Rule. a) b) c) d) e) What is the probability that the stock is above $83.55? (3 marks) what is the stock price that represents the lowest 16% of the values? (2 marks) What is the probability that the stock price is below $87.30? (2 marks) What is the stock price that represents the highest 0.15% of the values? (3 marks) What is the probability that the stock price fallsb marks) Question Marks Available 15 10 5 15 15 60 Marks Earned 4 Tota

Explanation / Answer

a) p [x > 83.55] = p [Z > 83.55 - 79.8 / 3.75]

= p [Z > 1]

= 0.1587

b) Stock price = Z score * sd + mean

= -1 * 3.75 + 79.8

= 76.05

c) p [x > 87.3] = p [Z > 87.3 - 79.8 / 3.75]

= p [Z > 2]

= 0.0228

d)

Stock price = Z score * sd + mean

= 1.04 * 3.75 + 79.8

= 83.7

e) p [72.3 < x < 87.3] = p [72.3 - 79.8/3.75 < < 87.3 - 79.8/3.75]

= p [-2 < Z < +2]

= 0.9544

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.