The stock price of a particular asset has a mean and standard deviation of $58.50 and $8.25, respectively. Use the normal distribution to compute the 95th percentile of this stock price.
A) −1.645
B) 1.645
C) 44.93
D) 72.07

Question

Quizplus · Accepted Answer

To find the 95th percentile, we need to find the z-score that corresponds to an area of 0.95 to the left of it. Using a z-table, we can find that the z-score for an area of 0.95 is 1.645.

We can use the formula z = (x - μ) / σ to solve for x (the stock price) given the mean (μ), standard deviation (σ), and z-score.

Plugging in the values we know: 
1.645 = (x - 58.50) / 8.25

Solving for x: 
x = 1.645 * 8.25 + 58.50 = 72.07

Therefore, the 95th percentile of the stock price is $72.07.

The Stock Price of a Particular Asset Has a Mean