The radi volume of a stock is the number of shares traded on a given day. The fo
ID: 3150831 • Letter: T
Question
The radi volume of a stock is the number of shares traded on a given day. The following data (in millions of shares) represents the trade volume of PepsiCo stock on 40 randomly selected trading days (Source: TD Ameritrade). The sample mean is 5.42 million shares, and the sample standard deviation is 1.48 million shares. How many additional trading days would you need to sample to construct a 99% confidence interval for the average trade volume of PepsiCo stock with a margin of error of 0.5 million shares?Explanation / Answer
Compute Sample Size
n = (Z a/2 * S.D / ME ) ^2
Z/2 at 0.01% LOS is = 2.58 ( From Standard Normal Table )
Standard Deviation ( S.D) = 1.48
ME =0.5
n = ( 2.58*1.48/0.5) ^2
= (3.818/0.5 ) ^2
= 58.321 ~ 59