
General: Experiment How would you use a completely randomized experiment in each of the following settings? Is a placebo being used or not? Be specific and give details.
(a) A charitable nonprofit organization wants to test two methods of fund-raising. From a list of 1000 past donors, half will be sent literature about the successful activities of the charity and asked to make another donation. The other 500 donors will be contacted by phone and asked to make another donation. The percentage of people from each group who make a new donation will be compared.
(b) A tooth-whitening gel is to be tested for effectiveness. A group of 85 adults have volunteered to participate in the study. Of these. 43 are to be given a gel that contains the tooth-whitening chemicals. The remaining 42 are to be given a similar-looking package of gel that does not contain the tooth-whitening chemicals. A standard method will be used to evaluate the whiteness of teeth for all participants. Then the results for the two groups will be compared. How could this experiment he designed to be double-blind?
(c) Consider the experiment described in part (a). Describe how you would use a randomized block experiment with blocks based on age. Use three blocks: donors younger than 30 years old. donors 30 to 59 years old. donors 60 and older.

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Chapter 1 Solutions
Student Solutions Manual for Brase/Brase's Understanding Basic Statistics, 7th
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- Question 5. We consider a put option with strike price K and expiration T. This option is priced using a 1-period CRR model. We consider r > 0, and σ > 0 very large. What is the approximate price of the option? In other words, what is the limit of the price of the option as σ∞. (Briefly justify your answer.)arrow_forwardQuestion 6. You collect daily data for the stock of a company Z over the past 4 months (i.e. 80 days) and calculate the log-returns (yk)/(-1. You want to build a CRR model for the evolution of the stock. The expected value and standard deviation of the log-returns are y = 0.06 and Sy 0.1. The money market interest rate is r = 0.04. Determine the risk-neutral probability of the model.arrow_forwardSeveral markets (Japan, Switzerland) introduced negative interest rates on their money market. In this problem, we will consider an annual interest rate r < 0. We consider a stock modeled by an N-period CRR model where each period is 1 year (At = 1) and the up and down factors are u and d. (a) We consider an American put option with strike price K and expiration T. Prove that if <0, the optimal strategy is to wait until expiration T to exercise.arrow_forward
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