# Stock Market and confidence intervals

Currently the stock market is declining. A stock broker wishes to determine his portfolio. She randomly choose 64 daily stock prices for stock A from the past year data, and obtain the 95.44% confidence interval for the average price to be [ $30.0 , $40.0] A. What is the confidence coefficient? aa) 50% bb) .9544 cc) 40.00 dd) $35.00 I believe it is bb, but correct me if I am wrong B. What is the average stock price of these 64 daily prices? aa) $35.00 bb) $30.00 cc) $40.00 dd) 95.44% I believe it is $35.00, because 30+40=70/2=35, correct me if I am wrong. C. Which test statistic is appied for this situation? aa) Z bb) t cc) None of the above. Not quite sure , but I think it is aa) Z, correct me if I am wrong. D. Which statemnt is correct: aa) This is a small sample bb) This is a large sample. cc) We should not invest in the stock market. dd) The current stock market for stock A is very good. I believe it is bb) large sample, because of the 64 stock prices, but correct me if i am wrong. E. What is an appropriate interpretation of the interval [430.0 , $40.0]? aa) 95.44% sure each daily price is between $30 and $40. bb) 95.44% of daily stock prices fall into $30 and $40. cc) 95.44% sure the true average price of stock A in between $30 and $40. dd) 95.44% sure the sample average price of these 64 daily prices is between $30 and $40. Not sure, but if I had to guess, bb. F. If we decide to compute an 80% confidence interval for the average price of stock A using the same data, then, 80% confidence interval would be____ the 95.44% confidence interval: aa) narrower than. bb) wider than. cc) the same as.

Please show or explain how you derived at these solutions and add any comments that you think might help me to better understand.

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#### Solution Preview

A).9544

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<br>B)$35 ( your thinking is correct.

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<br>C)Z ( if the sample size ...

#### Solution Summary

Currently the stock market is declining. A stock broker wishes to determine his portfolio. She randomly choose 64 daily stock prices for stock A from the past year data, and obtain the 95.44% confidence interval for the average price to be [ $30.0 , $40.0] A. What is the confidence coefficient? aa) 50% bb) .9544 cc) 40.00 dd) $35.00 I believe it is bb, but correct me if I am wrong B. What is the average stock price of these 64 daily prices? aa) $35.00 bb) $30.00 cc) $40.00 dd) 95.44% I believe it is $35.00, because 30+40=70/2=35, correct me if I am wrong. C. Which test statistic is appied for this situation? aa) Z bb) t cc) None of the above. Not quite sure , but I think it is aa) Z, correct me if I am wrong. D. Which statemnt is correct: aa) This is a small sample bb) This is a large sample. cc) We should not invest in the stock market. dd) The current stock market for stock A is very good. I believe it is bb) large sample, because of the 64 stock prices, but correct me if i am wrong. E. What is an appropriate interpretation of the interval [430.0 , $40.0]? aa) 95.44% sure each daily price is between $30 and $40. bb) 95.44% of daily stock prices fall into $30 and $40. cc) 95.44% sure the true average price of stock A in between $30 and $40. dd) 95.44% sure the sample average price of these 64 daily prices is between $30 and $40. Not sure, but if I had to guess, bb. F. If we decide to compute an 80% confidence interval for the average price of stock A using the same data, then, 80% confidence interval would be____ the 95.44% confidence interval: aa) narrower than. bb) wider than. cc) the same as.

Please show or explain how you derived at these solutions and add any comments that you think might help me to better understand.