Question

Based on Mrs. Greenback's years of experience as a mutual fund manager, she notices that the trading volume on the New York Stock Exchange has been growing in recent years. For the first two weeks of January 1998, the average daily volume was 646 million shares (Baron's January, 1998). The probability distribution of daily volume is approximately normal with a standard deviation of about 100 million shares. If the Exchange wants to issue a press release on the top 5% of trading days, what volume will trigger a release?

Grupo de opciones de respuesta

45.6%

811 Million

768 Million

687 Million

Answer 1

We need to find the top 5% of trading days,

We need to find the 95 percentile in the Z table. the 95th percentile in the Z table will be the point where 95% of the values of the normal distribution will lie below it

From a Z table ( which you can find in a standard format in a book or internet) ,

we can see for the 0.9505 value ,The corresponding row is 1.6 and column 0.05

So the z value is 1.65

Now according to the formula,

Z=( X - mean) / Std dev

Here mean = 646

Std dev = 100

or ,

1.65 = (X- 646)/100

Solving, X= 811

So 811 Mil volume will trigger a release