Question

The price-earnings ratio for firms in a given industry follows the normal distribution. In this industry, a firm whose price-earnings ratio has a standardized value of z = 1.00 is approximately in the highest ______ percent of firms in the industry.

A. 16%
B. 34%
C. 68%
D. 75%

Answer 1

The correct answer is

A. 16%

Explanation:

The zscore is used to solve problems of normally distributed samples.

This score indicates the percentage of a certain measure. It can be found looking at the z table.

For example, if a measure has a percentile of 75%, it is in the 100%-75% = highest 25 percent of all the measures.

`Z = 1` has a pvalue 0.8413. So it is in the highest 1-0.8413 = 0.1587 = 16% percent of firms in the industry.

The correct answer is

A. 16%