In early 2009, the company was experiencing a recession. But how was the recessi
ID: 3234724 • Letter: I
Question
In early 2009, the company was experiencing a recession. But how was the recession affecting the stock market? Shown are data from a sample of 15 companies. Shown for each company is the price per share of stock on January 1 and April 30 (The Wall Street Journal, May 1, 2009). See file PriceChange.
PRICECHANGE
a) What is the change in the mean price per share of stock over the four-month period?
b) Provide a 90% confidence interval estimate of the change in the mean price per share of stock. Interpret the results.
c) What was the percentage change in the mean price per share of stock over the four-month period?
d) If this same percentage change were to occur for the next four months and again for the four months thereafter, what would be the mean price per share of stock at the end of the year 2009?
Company January 1 ($) April 30 ($) Applied Materials 10.13 12.21 Bank of New York 28.33 25.48 ChevronTexaco 73.97 66.10 Cisco Systems 16.30 19.32 Coco Cola 45.27 43.05 Comcast 16.88 15.46 Ford Motors 2.29 5.98 General Electric 16.20 12.65 Johnson & Johnson 59.83 52.36 JP Morgan Chase 31.53 33.00 Microsoft 19.44 20.26 Oracle 17.73 19.34 Pfiser 17.71 13.36 Philip Morris 43.51 36.18 Procter & Gamble 61.82 49.44Explanation / Answer
all calculation has been approximated to two decimal places
(a) change in the mean price per share of stock over the four-month period=28.28- 30.73=-2.45
change is 2.45 downside
(b) change=-2.45
SE(change)=((sp*(1/n1 +1/n2)1/2)=19.6*sqrt(1/15 + 1/15)=7.16 and sp2=((n1-1)s12+(n2-1)s22)/n and n=n1+n2-2
(1-alpha)*100% confidence interval for change=mean±t(alpha/2,n)*SE(change)
90% confidence interval n=-2.45±t(0.1/2, 28)*7.16=-2.45±1.7011*7.16=-2.45±12.18=(-14.63, 9.73)
follwoing information has been generated using ms-excel
(c) %change=-2.45*100/30.73=-7.97%
(d) now price on 30th april is 28.28, if same -7.97% will occur the
downg in mean price on August 31 will be=28.28*7.97/100=2.25
mean price on August 31 will be=28.28-2.25=26.03
downg in mean price on December 31 will be=26.03*7.97/100=2.07
mean price on August 31 will be=26.03-2.07=23.96
following information has been generated using ms-excel
sample mean s s2 n (n-1)s2 1-Jan 30.73 21.34 455.3956 15 6375.538 30-Apr 21.34 17.69 312.9361 15 4381.105 total= 30 10756.64 sp2= 384.1659 sp= 19.60015