EBK BASIC BUSINESS STATISTICS
14th Edition
ISBN: 9780134685090
Author: STEPHAN
Publisher: VST
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Chapter 1, Problem 27PS
The amount of monthly data usage by a sample of 10 cellphone users (in MB) was:
0.4, 2.7MB, 5.6, 4,3, 11.4, 26.8, 1.6, 1,079, 8.3, 4.2
Are there any potential irregularities in the data?
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Question 2. An American option on a stock has payoff given by F = f(St) when it is exercised
at time t. We know that the function f is convex. A person claims that because of convexity,
it is optimal to exercise at expiration T. Do you agree with them?
Question 4. We consider a CRR model with So == 5 and up and down factors u = 1.03 and
d = 0.96. We consider the interest rate r = 4% (over one period). Is this a suitable CRR
model? (Explain your answer.)
Question 3. We want to price a put option with strike price K and expiration T. Two financial
advisors estimate the parameters with two different statistical methods: they obtain the same
return rate μ, the same volatility σ, but the first advisor has interest r₁ and the second advisor
has interest rate r2 (r1>r2). They both use a CRR model with the same number of periods to
price the option. Which advisor will get the larger price? (Explain your answer.)
Chapter 1 Solutions
EBK BASIC BUSINESS STATISTICS
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