The price of a share of stock divided by a company\'s estimated future earnings

Question

The price of a share of stock divided by a company's estimated future earnings per share is called the P/E ratio. High P/E ratios usually indicate "value" stocks or bargain stocks. A random sample of 51 of the largest companies in the United states gave the P/E ratios listed below. Find the 90% confidence interval for the PE population mean of all large U.S. companies. Round to 3 decimal places. Determine the parameter to estimate: population mean or population proportion. (circle 1) Determine the point estimate. _____ Determine the type of standard deviation given. State "sample", "population" nor "none". _____ If you either sample or population, give the value of the standard deviation. _____ Determine your critical value. _____ Determine the margin of error. _____ Determine the confidence interval. _____

Explanation / Answer

a) popn mean point estimate 25.17647 =AVERAGE(A2:A52) b) sample stdev =STDEV(A2:A52) 15.47218 c) critical value z(A/2) =NORMSINV(1-0.1/2) 1.644854 ME = z(a/2)*sqrt(sd/sqrt(n)) =1.645*(15.47/SQRT(51)) 3.563454 ci = mean+-ME lower =25.18-3.56 21.62 upper =25.18+3.56 28.74

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