Question

You decide to invest in stock in a particular type of company and set the guideline that 

you will only buy stock in companies that are ranked in the 80 the percentile or above in  terms of dividends paid in the previous year.  You are looking at a company that ranked  14 of 45 companies that paid dividends in 2019.  

a.

Will this company qualify for your portfolio?

b.

If you had the data on the total dividends paid by each of the 45 companies, which measure of average would be the most meaningful - mean, median, midrange, or 

mode?  Explain 

Answer & Explanation
Verified Solved by verified expert

Greetings of peace!

a. The company will not qualify for your portfolio.

b. The data would be most meaningful if median is used in measuring the average.

Please see further explanation on the images attached below.
Hope this helps. Thank you.

Step-by-step explanation
16175242
16175263

Image transcriptions
Let me explain first the concept of percentile. Percentile is a value or number that represents a percentage position on a range or list of data . For example, you have data 2, 3, 4, 1, 5, 6, 7, 8, 10, and 9 —we can arrange the data to 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10. 30% 70% 80% 20% 12345573910 Data point 3 is 30'" percentile. Data point 4 is 40'" percentile. Data point B is 80'" percentile. Solution: We are given that you only want to have companies that are ranked 80th percentile above. Orin other words the top 20% of the companies. Also, you are looking at a company that is ranked 14 of 45. Applying the concept of percentile, for us to compute the percentile of rank 14 company we just simply divide the rank of the company to the total number of companies. Percentile = i — E X 100% = 31.11% N 32% (Top 32% out of 45 companies) number of companies — 45 68% 32% 4544434241403938373635343332313029282726252423222120191817161514131211109 B 7 6 5 4 3 2 1 Since the rank 14 company does not belong to the top 20% or 80th percentile or above of the 45 companies. Therefore, the company will not qualify for your portfolio.
A lot of factors can affect how much dividends are given. Companies market capital, performance, growth etc. are the major indicators on how much dividend will be given to its stockholders. Thus, there is a great possibility that data could be extremes, or the minimum and maximum values could have great differences. In short, your data might have outliers. Out of the measures of central tendency, median is the least that is affected by these outliers. Therefore, the data would be the most meaningful if median is used in measuring the average of the data.