Question

A stock’s price fluctuations are approximately normally distributed with a mean of $29.51 and a standard deviation of $3.87. You decide to sell whenever the price reaches its highest 20% of values. What is the highest value you would still hold the stock?

Answer 1

Answer:

The highest value you would still hold the stock is $32.76

Explanation:

Hi, since the highest 20% of the values means the highest limit of 80% of the data, we have to use MS Excel or a normal distribution table to find the value of Z, and then use the following formula.

$Value=Mean+Z(S.D)$

S.D = Standard deviation

Z = Normal Distribution parameter (in our case, 0.84)

Everything should look like this.

$Value=29.51+0.84(3.87)=32.76$

Therefore, the highest value in which you would still hold the stock would be $32.76

Best of luck.