PRECALCULUS:GRAPHICAL,...-NASTA ED.
PRECALCULUS:GRAPHICAL,...-NASTA ED.
10th Edition
ISBN: 9780134672090
Author: Demana
Publisher: PEARSON
Expert Solution & Answer
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Chapter 10.3, Problem 46E
Solution

(a)

To calculate: The probability of the stock’s value dropping more than 1%.

The probability of the stock’s value dropping more than 1%is approximately is 0.025.

Given:

The expected increase in stock value is 7%.

The standard deviation or volatility of 4%

The distribution of market projections is normally distributed.

Concept used:

In a normal distribution, the percentage of data within one standard deviation of the mean is about 68%, the percentage of data within two standard deviations of the mean is about 95%, and the percentage of data within three standard deviations of the mean is about 99.7%. The Z score of a data value is the number of standard deviations from the mean and is calculated using the formula

  Z=X−μσ

where μ is the mean, σ is the standard deviation.

  PRECALCULUS:GRAPHICAL,...-NASTA ED., Chapter 10.3, Problem 46E , additional homework tip 1

Calculation:

The given projection is drop by 1% and its Z score is calculated as shown below

  Z=X−μσ=−1−74=−84=−2

The market projection of a drop by 1% is two standard deviations less than the mean. With reference to the empirical rule, there is 95% of the data within two standard deviations of the mean or there is 47.5% of the data between the mean and two standard deviations above the mean. Mean divides the entire data into two equal parts 50%, thus the percentage of data where the drop in market projection is more than 1% or below two standard deviations from the mean is =50%−47.5%=2.5% .

Conclusion:

The probability that market projection is dropping more than 1% is =2.5%100=0.025

(b)

To calculate: The probability of stocks value increasing between weights 3% and 15%.

The probability of stocks value increasing between weights 3% and 15% is 0.815

Calculation:

With reference to the normal curve and empirical rule, there is about 95% of data within two standard deviations of the mean, and about 68% of the data within one standard deviation of the mean.

The Z scores for given market projections are calculated as shown below

  For 3%Z=X−μσ=3−74=−44=−1For 15%Z=X−μσ=15−74=84=2 .

The given market projections 3%, and 15% are one standard deviations less than mean and two standard deviations more than mean respectively.

  PRECALCULUS:GRAPHICAL,...-NASTA ED., Chapter 10.3, Problem 46E , additional homework tip 2

With reference to the empirical rule the percentage of data between the mean and one standard deviation less than the mean is about 34% and the percentage of data between the mean and the two standard deviations above the mean is 47.5%. Thus the percentage of data between one standard deviation less than the mean and two standard deviations more than the mean is =47.5%+34%=81.5%

Conclusion:

The probability that market projection is increasing between 3%. and 15% is about =81.5%100=0.815 .

(c)

To calculate: The market projection which is worst 16% of the expected outcome.

The market projection which is worst 16% of the expected outcome is increase by 3%.

Calculation:

With reference to the normal curve and empirical rule, there is about 68% of data is within one standard deviation from the mean and about 16% of data in each tail.

Thus the worst 16% of data will be below the one standard deviations below the mean (-1) and is calculated as shown below

  Z=X−μσ−1=X−74X=7−4×1X=3 .

The stock’s price with a change of about 3% and below it represents the worst 16% of projected outcomes.

Conclusion:

There should be a change of about 3% increase for it to be the worst 16% of projected outcomes..

(d)

To explain: If it is an unlikely event to expect a 20% increase in this stock’s price.

It is surprising or unlikely to find out the projected return of increase is about 20%..

Concept used:

According to , the empirical rule about 99.7% of data lie within three standard deviations of the mean and if any particular value has a Z score more than 3 or less than -3, then it is less very likely to occur or unusual.

Calculation:

The given percentage increase 20%, Z score is calculated as shown below

  Z=X−μσ=20−74=134=3.25

Interpretation:

The Z score of percentage increase of 20%. is 3.25, so it is 3.25 standard deviations more than the mean. According to the empirical rule, about 99.7% of the data lie within three standard deviations of the mean. Thus the likelihood of a stock price increase by 20% is very less. Thus it is foolish to consider a 20% increase in the stock’s price.

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Chapter 10.3, Problem 45E
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Chapter 10.3, Problem 47E

Chapter 10 Solutions

PRECALCULUS:GRAPHICAL,...-NASTA ED.

Ch. 10.1 - Prob. 1QRCh. 10.1 - Prob. 2QRCh. 10.1 - Prob. 3QRCh. 10.1 - Prob. 4QRCh. 10.1 - Prob. 5QRCh. 10.1 - Prob. 6QRCh. 10.1 - Prob. 7QRCh. 10.1 - Prob. 8QRCh. 10.1 - Prob. 9QRCh. 10.1 - Prob. 10QR
Ch. 10.1 - Prob. 1ECh. 10.1 - Prob. 2ECh. 10.1 - Prob. 3ECh. 10.1 - Prob. 4ECh. 10.1 - Prob. 5ECh. 10.1 - Prob. 6ECh. 10.1 - Prob. 7ECh. 10.1 - Prob. 8ECh. 10.1 - Prob. 9ECh. 10.1 - Prob. 10ECh. 10.1 - Prob. 11ECh. 10.1 - Prob. 12ECh. 10.1 - Prob. 13ECh. 10.1 - Prob. 14ECh. 10.1 - Prob. 15ECh. 10.1 - Prob. 16ECh. 10.1 - Prob. 17ECh. 10.1 - Prob. 18ECh. 10.1 - Prob. 19ECh. 10.1 - Prob. 20ECh. 10.1 - Prob. 21ECh. 10.1 - Prob. 22ECh. 10.1 - Prob. 23ECh. 10.1 - Prob. 24ECh. 10.1 - Prob. 25ECh. 10.1 - Prob. 26ECh. 10.1 - Prob. 27ECh. 10.1 - Prob. 28ECh. 10.1 - Prob. 29ECh. 10.1 - Prob. 30ECh. 10.1 - Prob. 31ECh. 10.1 - Prob. 32ECh. 10.1 - Prob. 33ECh. 10.1 - Prob. 34ECh. 10.1 - Prob. 35ECh. 10.1 - Prob. 36ECh. 10.1 - Prob. 37ECh. 10.1 - Prob. 38ECh. 10.1 - Prob. 39ECh. 10.1 - Prob. 40ECh. 10.1 - Prob. 41ECh. 10.1 - Prob. 42ECh. 10.1 - Prob. 43ECh. 10.1 - Prob. 44ECh. 10.1 - Prob. 45ECh. 10.1 - Prob. 46ECh. 10.1 - Prob. 47ECh. 10.1 - Prob. 48ECh. 10.1 - Prob. 49ECh. 10.1 - Prob. 50ECh. 10.1 - Prob. 51ECh. 10.1 - Prob. 52ECh. 10.1 - Prob. 53ECh. 10.1 - Prob. 54ECh. 10.1 - Prob. 55ECh. 10.1 - Prob. 56ECh. 10.1 - Prob. 57ECh. 10.1 - Prob. 58ECh. 10.1 - Prob. 59ECh. 10.1 - Prob. 60ECh. 10.1 - Prob. 61ECh. 10.1 - Prob. 62ECh. 10.2 - Prob. 1QRCh. 10.2 - Prob. 2QRCh. 10.2 - Prob. 3QRCh. 10.2 - Prob. 4QRCh. 10.2 - Prob. 5QRCh. 10.2 - Prob. 6QRCh. 10.2 - Prob. 7QRCh. 10.2 - Prob. 8QRCh. 10.2 - Prob. 9QRCh. 10.2 - Prob. 10QRCh. 10.2 - Prob. 1ECh. 10.2 - Prob. 2ECh. 10.2 - Prob. 3ECh. 10.2 - Prob. 4ECh. 10.2 - Prob. 5ECh. 10.2 - Prob. 6ECh. 10.2 - Prob. 7ECh. 10.2 - Prob. 8ECh. 10.2 - Prob. 9ECh. 10.2 - Prob. 10ECh. 10.2 - Prob. 11ECh. 10.2 - Prob. 12ECh. 10.2 - Prob. 13ECh. 10.2 - Prob. 14ECh. 10.2 - Prob. 15ECh. 10.2 - Prob. 16ECh. 10.2 - Prob. 17ECh. 10.2 - Prob. 18ECh. 10.2 - Prob. 19ECh. 10.2 - Prob. 20ECh. 10.2 - Prob. 21ECh. 10.2 - Prob. 22ECh. 10.2 - Prob. 23ECh. 10.2 - Prob. 24ECh. 10.2 - Prob. 25ECh. 10.2 - Prob. 26ECh. 10.2 - Prob. 27ECh. 10.2 - Prob. 28ECh. 10.2 - Prob. 29ECh. 10.2 - Prob. 30ECh. 10.2 - Prob. 31ECh. 10.2 - Prob. 32ECh. 10.2 - Prob. 33ECh. 10.2 - Prob. 34ECh. 10.2 - Prob. 35ECh. 10.2 - Prob. 36ECh. 10.2 - Prob. 37ECh. 10.2 - Prob. 38ECh. 10.2 - Prob. 39ECh. 10.2 - Prob. 40ECh. 10.2 - Prob. 41ECh. 10.2 - Prob. 42ECh. 10.2 - Prob. 43ECh. 10.2 - Prob. 44ECh. 10.2 - Prob. 45ECh. 10.2 - Prob. 46ECh. 10.2 - Prob. 47ECh. 10.2 - Prob. 48ECh. 10.3 - Prob. 1QRCh. 10.3 - Prob. 2QRCh. 10.3 - Prob. 3QRCh. 10.3 - Prob. 4QRCh. 10.3 - Prob. 5QRCh. 10.3 - Prob. 6QRCh. 10.3 - Prob. 7QRCh. 10.3 - Prob. 8QRCh. 10.3 - Prob. 9QRCh. 10.3 - Prob. 10QRCh. 10.3 - Prob. 1ECh. 10.3 - Prob. 2ECh. 10.3 - Prob. 3ECh. 10.3 - Prob. 4ECh. 10.3 - Prob. 5ECh. 10.3 - Prob. 6ECh. 10.3 - Prob. 7ECh. 10.3 - Prob. 8ECh. 10.3 - Prob. 9ECh. 10.3 - Prob. 10ECh. 10.3 - Prob. 11ECh. 10.3 - Prob. 12ECh. 10.3 - Prob. 13ECh. 10.3 - Prob. 14ECh. 10.3 - Prob. 15ECh. 10.3 - Prob. 16ECh. 10.3 - Prob. 17ECh. 10.3 - Prob. 18ECh. 10.3 - Prob. 19ECh. 10.3 - Prob. 20ECh. 10.3 - Prob. 21ECh. 10.3 - Prob. 22ECh. 10.3 - Prob. 23ECh. 10.3 - Prob. 24ECh. 10.3 - Prob. 25ECh. 10.3 - Prob. 26ECh. 10.3 - Prob. 27ECh. 10.3 - Prob. 28ECh. 10.3 - Prob. 29ECh. 10.3 - Prob. 30ECh. 10.3 - Prob. 31ECh. 10.3 - Prob. 32ECh. 10.3 - Prob. 33ECh. 10.3 - Prob. 34ECh. 10.3 - Prob. 35ECh. 10.3 - Prob. 36ECh. 10.3 - Prob. 37ECh. 10.3 - Prob. 38ECh. 10.3 - Prob. 39ECh. 10.3 - Prob. 40ECh. 10.3 - Prob. 41ECh. 10.3 - Prob. 42ECh. 10.3 - Prob. 43ECh. 10.3 - Prob. 44ECh. 10.3 - Prob. 45ECh. 10.3 - Prob. 46ECh. 10.3 - Prob. 47ECh. 10.3 - Prob. 48ECh. 10.3 - Prob. 49ECh. 10.3 - Prob. 50ECh. 10.3 - Prob. 51ECh. 10.3 - Prob. 52ECh. 10.3 - Prob. 53ECh. 10.3 - Prob. 54ECh. 10.3 - Prob. 55ECh. 10.3 - Prob. 56ECh. 10.3 - Prob. 57ECh. 10.3 - Prob. 58ECh. 10.3 - Prob. 59ECh. 10.3 - Prob. 60ECh. 10.4 - Prob. 1QRCh. 10.4 - Prob. 2QRCh. 10.4 - Prob. 3QRCh. 10.4 - Prob. 4QRCh. 10.4 - Prob. 5QRCh. 10.4 - Prob. 6QRCh. 10.4 - Prob. 7QRCh. 10.4 - Prob. 8QRCh. 10.4 - Prob. 9QRCh. 10.4 - Prob. 10QRCh. 10.4 - Prob. 1ECh. 10.4 - Prob. 2ECh. 10.4 - Prob. 3ECh. 10.4 - 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Prob. 55ECh. 10.4 - Prob. 56ECh. 10.5 - Prob. 1QRCh. 10.5 - Prob. 2QRCh. 10.5 - Prob. 3QRCh. 10.5 - Prob. 4QRCh. 10.5 - Prob. 5QRCh. 10.5 - Prob. 6QRCh. 10.5 - Prob. 7QRCh. 10.5 - Prob. 8QRCh. 10.5 - Prob. 9QRCh. 10.5 - Prob. 10QRCh. 10.5 - Prob. 1ECh. 10.5 - Prob. 2ECh. 10.5 - Prob. 3ECh. 10.5 - Prob. 4ECh. 10.5 - Prob. 5ECh. 10.5 - Prob. 6ECh. 10.5 - Prob. 7ECh. 10.5 - Prob. 8ECh. 10.5 - Prob. 9ECh. 10.5 - Prob. 10ECh. 10.5 - Prob. 11ECh. 10.5 - Prob. 12ECh. 10.5 - Prob. 13ECh. 10.5 - Prob. 14ECh. 10.5 - Prob. 15ECh. 10.5 - Prob. 16ECh. 10.5 - Prob. 17ECh. 10.5 - Prob. 18ECh. 10.5 - Prob. 19ECh. 10.5 - Prob. 20ECh. 10.5 - Prob. 21ECh. 10.5 - Prob. 22ECh. 10.5 - Prob. 23ECh. 10.5 - Prob. 24ECh. 10.5 - Prob. 25ECh. 10.5 - Prob. 26ECh. 10.5 - Prob. 27ECh. 10.5 - Prob. 28ECh. 10.5 - Prob. 29ECh. 10.5 - Prob. 30ECh. 10.5 - Prob. 31ECh. 10.5 - Prob. 32ECh. 10.5 - Prob. 33ECh. 10.5 - Prob. 34ECh. 10.5 - Prob. 35ECh. 10.5 - Prob. 36ECh. 10.5 - Prob. 37ECh. 10.5 - Prob. 38ECh. 10.5 - Prob. 39ECh. 10.5 - Prob. 40ECh. 10.5 - Prob. 41ECh. 10.5 - Prob. 42ECh. 10.5 - Prob. 43ECh. 10.5 - Prob. 44ECh. 10.5 - Prob. 45ECh. 10.5 - Prob. 46ECh. 10.5 - Prob. 47ECh. 10.5 - Prob. 48ECh. 10.5 - Prob. 49ECh. 10.5 - Prob. 50ECh. 10.5 - Prob. 51ECh. 10.5 - Prob. 52ECh. 10.5 - Prob. 55ECh. 10.5 - Prob. 56ECh. 10.5 - Prob. 59ECh. 10.5 - Prob. 60ECh. 10 - Prob. 1RECh. 10 - Prob. 2RECh. 10 - Prob. 3RECh. 10 - Prob. 4RECh. 10 - Prob. 5RECh. 10 - Prob. 6RECh. 10 - Prob. 7RECh. 10 - Prob. 8RECh. 10 - Prob. 9RECh. 10 - Prob. 10RECh. 10 - Prob. 11RECh. 10 - Prob. 12RECh. 10 - Prob. 13RECh. 10 - Prob. 14RECh. 10 - Prob. 15RECh. 10 - Prob. 16RECh. 10 - Prob. 17RECh. 10 - Prob. 18RECh. 10 - Prob. 19RECh. 10 - Prob. 20RECh. 10 - Prob. 21RECh. 10 - Prob. 22RECh. 10 - Prob. 23RECh. 10 - Prob. 24RECh. 10 - Prob. 25RECh. 10 - Prob. 26RECh. 10 - Prob. 27RECh. 10 - Prob. 28RECh. 10 - Prob. 29RECh. 10 - Prob. 30RECh. 10 - Prob. 31RECh. 10 - Prob. 32RECh. 10 - Prob. 33RECh. 10 - Prob. 34RECh. 10 - Prob. 35RECh. 10 - Prob. 36RECh. 10 - Prob. 37RECh. 10 - Prob. 38RECh. 10 - Prob. 39RECh. 10 - Prob. 40RECh. 10 - Prob. 41RECh. 10 - Prob. 42RECh. 10 - Prob. 43RECh. 10 - Prob. 44RECh. 10 - Prob. 45RECh. 10 - Prob. 46RECh. 10 - Prob. 47RECh. 10 - Prob. 48RECh. 10 - Prob. 49RECh. 10 - Prob. 50RECh. 10 - Prob. 51RECh. 10 - Prob. 52RECh. 10 - Prob. 53RECh. 10 - Prob. 54RECh. 10 - Prob. 55RECh. 10 - Prob. 56RECh. 10 - Prob. 57RECh. 10 - Prob. 58RECh. 10 - Prob. 59RECh. 10 - Prob. 60RECh. 10 - Prob. 61RECh. 10 - Prob. 62RECh. 10 - Prob. 63RECh. 10 - Prob. 64RECh. 10 - Prob. 65RECh. 10 - Prob. 66RECh. 10 - Prob. 67RECh. 10 - Prob. 68RECh. 10 - Prob. 69RECh. 10 - Prob. 70RECh. 10 - Prob. 71RECh. 10 - Prob. 72RE
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