Suppose that a certain frequently traded stock is only priced up to round dollar values (that is, nocents are considered), and you place a BUY trade for $10/share today. The price of this stockchanges every day, and, by the end of trading hours each day, it goes up by $1 with probabilityp=0.51, and down by $1 with probability 1-p. As a wise investor, you place a STOP order thatautomatically sells all your shares if the market price reaches $5/share at any time in the future, tolimit your losses in case the market moves against you. Furthermore, you place an order to SELL allyour shares if the market price reaches $15/share. What is the probability that your SELL orderexecutes before your STOP order?(TYPE YOUR ANSWER AS A NUMBER WITH TWO DECIMALS, I.E., BETWEEN 0.00 AND 1.00.REMEMBER TO ROUND TO THE *NEAREST* SUCH NUMBER)

Answered: a certain frequently traded stock is…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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1. ABC inc. stock is currently selling for $30, one year from today the stock price can either increase by 20% or decrease by 15%. The probability of an increase in the stock price is equal to 0.3. The one-year risk-free rate is 5% What is the value of a European put that expires in one year with an exercise price of $24. 2. Graphically, show the value and the profit and loss of the following butterfly position: Long in a call with an exercise price of $30, short in 2 calls with an exercise price of $45, and long in a call with an exercise price of 60. All calls are written on the same stock and have the same maturity. 3. "Early exercise of an American option on a stock that does not pay any dividend is not optimal regardless of whether the option is a Call or a Put". True, False, or Uncertain. Explain.
Suppose you are deciding whether or not to bring an umbrella to school and the weathercan be either sunny or rainy. Initially, you think the probability that it will be sunny isP (S) = 0.6, and the probability that it will be rainy is P (R) = 0.4. If you bring an umbrellaand it rains, your payoff is 6. If you bring an umbrella and it is sunny, your payoff is 9. Ifyou don’t bring an umbrella and it rains, your payoff is 0. If you don’t bring an umbrellaand it is sunny, your payoff is 10. Suppose that you check two websites for weather forecasts.You know that the two forecasts are independent of each other, and each forecast is correct70% of the time. That is, the probability that the website says it will be sunny given that itactually will be sunny is 0.7, and the probability that the website says it will rain given thatit actually will rain is 0.7. Suppose that you suffer from confirmation bias. You initially thinkit is more likely to be sunny, so you misinterpret rain forecasts as sun…
Suppose an oil company is thinking of buying some land for $10,000,000. There is a 60%60% chance of economic growth and a 40%40% chance of recession. The probability of discovering oil is 44%44% when there is economic growth and 32%32% when there is a recession. If there is economic growth and the oil company discovers oil, the value of the land will triple. If they do not discover oil, the value of the land will decrease by 10%.10%. If there is a recession and the company discovers oil, the value of the land will increase by 50%.50%. If they do not discover oil, the land will decrease in value by 75%.75%. What is the expected value of the investment? Give your answer to the nearest dollar. Avoid rounding within calculations. $$ Select the correct interpretation of the expected value. The expected value represents what the actual investment value will be for this land purchase of $10,000,000. The company should make the investment because the expected value…
Please provide steps for how you got the solution to the problem provided below. A freelance worker spends her days doing one of two things: working on a project or looking for a new project. Whenever she has a project to work on, she dedicates her full attention to it. On a particular month, she will complete the current project with probability 0.3. After completing project she takes the rest of the month off, and then at the beginning of the next month starts looking for work. On a given month, she will successfully find a new project with probability 0.85. After identifying a new project, she will start working on it at the beginning of the next month. i. Model the status of the worker (looking for a project of busy working a project) as a Markov chain. Give transition matrix. ii. Suppose that on March 1st she started looking for a new project. Find the probability that she will be working on a project during the month of May.
< CO 2. There is a 0.9987 probability that a randomly selected 32 year-old male lives through the year. A life insurance company charges $169 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $110,000 as a death benefit. (a) From the perspective of the 32 year old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The value corresponding to surviving the year is $ The value corresponding to not surviving the year is $ (b) If 32 year-old male purchases the policy, what is his expected value? The expected value is $ (Round to the nearest cent as needed.) « Previous Next » LAON 23 3D 昌吧 MacBook Air 000 000 DD F7 公 F3 F4 F5 F6 F8 $ 4 5. 6 80

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