Probability and Statistics for Engineering and the Sciences
9th Edition
ISBN: 9781305251809
Author: Jay L. Devore
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
thumb_up100%
Chapter 1.1, Problem 1E
Give one possible
- a. All daily newspapers published in the United States
- b. All companies listed on the New York Stock Exchange
- c. All students at your college or university
- d. All grade point averages of students at your college or university
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
You have been hired as an intern to run analyses on the data and report the results back to Sarah; the five questions that Sarah needs you to address are given below.
Does there appear to be a positive or negative relationship between price and screen size? Use a scatter plot to examine the relationship.
Determine and interpret the correlation coefficient between the two variables. In your interpretation, discuss the direction of the relationship (positive, negative, or zero relationship). Also discuss the strength of the relationship.
Estimate the relationship between screen size and price using a simple linear regression model and interpret the estimated coefficients. (In your interpretation, tell the dollar amount by which price will change for each unit of increase in screen size).
Include the manufacturer dummy variable (Samsung=1, 0 otherwise) and estimate the relationship between screen size, price and manufacturer dummy as a multiple linear regression model.
Interpret the…
Does there appear to be a positive or negative relationship between price and screen size? Use a scatter plot to examine the relationship. How to take snapshots: if you use a MacBook, press Command+ Shift+4 to take snapshots. If you are using Windows, use the Snipping Tool to take snapshots.
Question 1: Determine and interpret the correlation coefficient between the two variables. In your interpretation, discuss the direction of the relationship (positive, negative, or zero relationship). Also discuss the strength of the relationship.
Value of correlation coefficient:
Direction of the relationship (positive, negative, or zero relationship):
Strength of the relationship (strong/moderate/weak):
Question 2: Estimate the relationship between screen size and price using a simple linear regression model and interpret the estimated coefficients. In your interpretation, tell the dollar amount by which price will change for each unit of increase in screen size. (The answer for the…
In this problem, we consider a Brownian motion (W+) t≥0. We consider a stock model (St)t>0
given (under the measure P) by
d.St 0.03 St dt + 0.2 St dwt,
with So 2. We assume that the interest rate is r = 0.06. The purpose of this problem is to
price an option on this stock (which we name cubic put). This option is European-type, with
maturity 3 months (i.e. T = 0.25 years), and payoff given by
F = (8-5)+
(a) Write the Stochastic Differential Equation satisfied by (St) under the risk-neutral measure
Q. (You don't need to prove it, simply give the answer.)
(b) Give the price of a regular European put on (St) with maturity 3 months and strike K = 2.
(c) Let X =
S. Find the Stochastic Differential Equation satisfied by the process (Xt)
under the measure Q.
(d) Find an explicit expression for X₁ = S3 under measure Q.
(e) Using the results above, find the price of the cubic put option mentioned above.
(f) Is the price in (e) the same as in question (b)? (Explain why.)
Chapter 1 Solutions
Probability and Statistics for Engineering and the Sciences
Ch. 1.1 - Give one possible sample of size 4 from each of...Ch. 1.1 - For each of the following hypothetical...Ch. 1.1 - Consider the population consisting of all...Ch. 1.1 - a. Give three different examples of concrete...Ch. 1.1 - Many universities and colleges have instituted...Ch. 1.1 - The California State University (CSU) system...Ch. 1.1 - A certain city divides naturally into ten district...Ch. 1.1 - The amount of flow through a solenoid valve in an...Ch. 1.1 - In a famous experiment carried out in 1882,...Ch. 1.2 - Consider the strength data for beams given in...
Ch. 1.2 - The accompanying specific gravity values for...Ch. 1.2 - The accompanying summary data on CeO2 particle...Ch. 1.2 - Allowable mechanical properties for structural...Ch. 1.2 - The accompanying data set consists of observations...Ch. 1.2 - Do running limes of American movies differ somehow...Ch. 1.2 - The article cited in Example 1.2 also gave the...Ch. 1.2 - The accompanying data came from a study of...Ch. 1.2 - Every corporation has a governing board of...Ch. 1.2 - The number of contaminating particles on a silicon...Ch. 1.2 - The article Determination of Most Representative...Ch. 1.2 - The article cited in Exercise 20 also gave the...Ch. 1.2 - How does the speed of a runner vary over the...Ch. 1.2 - The article Statistical Modeling of the Time...Ch. 1.2 - The accompanying data set consists of observations...Ch. 1.2 - A transformation of data values by means of some...Ch. 1.2 - The accompanying summary data on CeO2 particle...Ch. 1.2 - The article Study on the Life Distribution of...Ch. 1.2 - The accompanying frequency distribution on...Ch. 1.2 - The following categories for type of physical...Ch. 1.2 - A Pareto diagram is a variation of a histogram for...Ch. 1.2 - The cumulative frequency and cumulative relative...Ch. 1.2 - Fire load (MJ/m2) is the heat energy that could be...Ch. 1.3 - The May 1, 2009, issue of The Montclarian reported...Ch. 1.3 - Exposure to microbial products, especially...Ch. 1.3 - Mercury is a persistent and dispersive...Ch. 1.3 - A sample of 26 offshore oil workers took part in a...Ch. 1.3 - The article Snow Cover and Temperature...Ch. 1.3 - Blood pressure values are often reported to the...Ch. 1.3 - The propagation of fatigue cracks in various...Ch. 1.3 - Compute the sample median. 25% trimmed mean. 10%...Ch. 1.3 - A sample of n = 10 automobiles was selected, and...Ch. 1.3 - a. If a constant c is added to each xi in a...Ch. 1.3 - An experiment to study the lifetime (in hours) for...Ch. 1.4 - Poly(3-hydroxybutyrate) (PHB), a semicrystalline...Ch. 1.4 - The value of Youngs modulus (GPa) was determined...Ch. 1.4 - The article Effects of Short-Term Warming on Low...Ch. 1.4 - Zinfandel is a popular red wine varietal produced...Ch. 1.4 - Exercise 34 presented the following data on...Ch. 1.4 - A study of the relationship between age and...Ch. 1.4 - In 1997 a woman sued a computer keyboard...Ch. 1.4 - The article A Thin-Film Oxygen Uptake Test for the...Ch. 1.4 - The first four deviations from the mean in a...Ch. 1.4 - A mutual fund is a professionally managed...Ch. 1.4 - Grip is applied to produce normal surface forces...Ch. 1.4 - Here is a stem-and-leaf display of the escape time...Ch. 1.4 - The following data on distilled alcohol content...Ch. 1.4 - A sample of 20 glass bottles of a particular type...Ch. 1.4 - A company utilizes two different machines to...Ch. 1.4 - Blood cocaine concentration (mg/L) was determined...Ch. 1.4 - Observations on burst strength (lb/in2) were...Ch. 1.4 - The accompanying comparative boxplot of gasoline...Ch. 1 - Consider the following information on ultimate...Ch. 1 - A sample of 77 individuals working at a particular...Ch. 1 - Fretting is a wear process that results from...Ch. 1 - The accompanying frequency distribution of...Ch. 1 - A deficiency of the (race element selenium in the...Ch. 1 - Aortic stenosis refers to a narrowing of the...Ch. 1 - a. For what value of c is the quantity (xi c)2...Ch. 1 - a. Let a and b be constants and let yi = axi + b...Ch. 1 - Elevated energy consumption during exercise...Ch. 1 - Here is a description from Minitab of the strength...Ch. 1 - Anxiety disorders and symptoms can often be...Ch. 1 - The article Can We Really Walk Straight? (Amer. J....Ch. 1 - The mode of a numerical data set is the value that...Ch. 1 - Specimens of three different types of rope wire...Ch. 1 - The three measures of center introduced in this...Ch. 1 - The authors of the article Predictive Model for...Ch. 1 - Consider a sample x1 , x2,..., xn and suppose that...Ch. 1 - Let xn and sn2 denote the sample mean and variance...Ch. 1 - Lengths of bus routes for any particular transit...Ch. 1 - A study carried out to investigate the...Ch. 1 - Prob. 82SECh. 1 - Prob. 83SECh. 1 - Consider a sample x1, ... , xn with n even. Let xL...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, statistics and related others by exploring similar questions and additional content below.Similar questions
- Problem 4. Margrabe formula and the Greeks (20 pts) In the homework, we determined the Margrabe formula for the price of an option allowing you to swap an x-stock for a y-stock at time T. For stocks with initial values xo, yo, common volatility σ and correlation p, the formula was given by Fo=yo (d+)-x0Þ(d_), where In (±² Ꭲ d+ õ√T and σ = σ√√√2(1 - p). дго (a) We want to determine a "Greek" for ỡ on the option: find a formula for θα (b) Is дго θα positive or negative? (c) We consider a situation in which the correlation p between the two stocks increases: what can you say about the price Fo? (d) Assume that yo< xo and p = 1. What is the price of the option?arrow_forwardWe consider a 4-dimensional stock price model given (under P) by dẴ₁ = µ· Xt dt + йt · ΣdŴt where (W) is an n-dimensional Brownian motion, π = (0.02, 0.01, -0.02, 0.05), 0.2 0 0 0 0.3 0.4 0 0 Σ= -0.1 -4a За 0 0.2 0.4 -0.1 0.2) and a E R. We assume that ☑0 = (1, 1, 1, 1) and that the interest rate on the market is r = 0.02. (a) Give a condition on a that would make stock #3 be the one with largest volatility. (b) Find the diversification coefficient for this portfolio as a function of a. (c) Determine the maximum diversification coefficient d that you could reach by varying the value of a? 2arrow_forwardQuestion 1. Your manager asks you to explain why the Black-Scholes model may be inappro- priate for pricing options in practice. Give one reason that would substantiate this claim? Question 2. We consider stock #1 and stock #2 in the model of Problem 2. Your manager asks you to pick only one of them to invest in based on the model provided. Which one do you choose and why ? Question 3. Let (St) to be an asset modeled by the Black-Scholes SDE. Let Ft be the price at time t of a European put with maturity T and strike price K. Then, the discounted option price process (ert Ft) t20 is a martingale. True or False? (Explain your answer.) Question 4. You are considering pricing an American put option using a Black-Scholes model for the underlying stock. An explicit formula for the price doesn't exist. In just a few words (no more than 2 sentences), explain how you would proceed to price it. Question 5. We model a short rate with a Ho-Lee model drt = ln(1+t) dt +2dWt. Then the interest rate…arrow_forward
- In this problem, we consider a Brownian motion (W+) t≥0. We consider a stock model (St)t>0 given (under the measure P) by d.St 0.03 St dt + 0.2 St dwt, with So 2. We assume that the interest rate is r = 0.06. The purpose of this problem is to price an option on this stock (which we name cubic put). This option is European-type, with maturity 3 months (i.e. T = 0.25 years), and payoff given by F = (8-5)+ (a) Write the Stochastic Differential Equation satisfied by (St) under the risk-neutral measure Q. (You don't need to prove it, simply give the answer.) (b) Give the price of a regular European put on (St) with maturity 3 months and strike K = 2. (c) Let X = S. Find the Stochastic Differential Equation satisfied by the process (Xt) under the measure Q. (d) Find an explicit expression for X₁ = S3 under measure Q. (e) Using the results above, find the price of the cubic put option mentioned above. (f) Is the price in (e) the same as in question (b)? (Explain why.)arrow_forwardThe managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c. Question content area bottom Part 1 a. Develop a simple linear regression model between billable hours and overhead costs. Overhead Costsequals=212495.2212495.2plus+left parenthesis 42.4857 right parenthesis42.485742.4857times×Billable Hours (Round the constant to one decimal place as needed. Round the coefficient to four decimal places as needed. Do not include the $ symbol in your answers.) Part 2 b. Interpret the coefficients of your regression model. Specifically, what does the fixed component of the model mean to the consulting firm? Interpret the fixed term, b 0b0, if appropriate. Choose the correct answer below. A. The value of b 0b0 is the predicted billable hours for an overhead cost of 0 dollars. B. It is not appropriate to interpret b 0b0, because its value…arrow_forwardUsing the accompanying Home Market Value data and associated regression line, Market ValueMarket Valueequals=$28,416+$37.066×Square Feet, compute the errors associated with each observation using the formula e Subscript ieiequals=Upper Y Subscript iYiminus−ModifyingAbove Upper Y with caret Subscript iYi and construct a frequency distribution and histogram. LOADING... Click the icon to view the Home Market Value data. Question content area bottom Part 1 Construct a frequency distribution of the errors, e Subscript iei. (Type whole numbers.) Error Frequency minus−15 comma 00015,000less than< e Subscript iei less than or equals≤minus−10 comma 00010,000 0 minus−10 comma 00010,000less than< e Subscript iei less than or equals≤minus−50005000 5 minus−50005000less than< e Subscript iei less than or equals≤0 21 0less than< e Subscript iei less than or equals≤50005000 9…arrow_forward
- The managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c Overhead Costs Billable Hours345000 3000385000 4000410000 5000462000 6000530000 7000545000 8000arrow_forwardUsing the accompanying Home Market Value data and associated regression line, Market ValueMarket Valueequals=$28,416plus+$37.066×Square Feet, compute the errors associated with each observation using the formula e Subscript ieiequals=Upper Y Subscript iYiminus−ModifyingAbove Upper Y with caret Subscript iYi and construct a frequency distribution and histogram. Square Feet Market Value1813 911001916 1043001842 934001814 909001836 1020002030 1085001731 877001852 960001793 893001665 884001852 1009001619 967001690 876002370 1139002373 1131001666 875002122 1161001619 946001729 863001667 871001522 833001484 798001589 814001600 871001484 825001483 787001522 877001703 942001485 820001468 881001519 882001518 885001483 765001522 844001668 909001587 810001782 912001483 812001519 1007001522 872001684 966001581 86200arrow_forwarda. Find the value of A.b. Find pX(x) and py(y).c. Find pX|y(x|y) and py|X(y|x)d. Are x and y independent? Why or why not?arrow_forward
- The PDF of an amplitude X of a Gaussian signal x(t) is given by:arrow_forwardThe PDF of a random variable X is given by the equation in the picture.arrow_forwardFor a binary asymmetric channel with Py|X(0|1) = 0.1 and Py|X(1|0) = 0.2; PX(0) = 0.4 isthe probability of a bit of “0” being transmitted. X is the transmitted digit, and Y is the received digit.a. Find the values of Py(0) and Py(1).b. What is the probability that only 0s will be received for a sequence of 10 digits transmitted?c. What is the probability that 8 1s and 2 0s will be received for the same sequence of 10 digits?d. What is the probability that at least 5 0s will be received for the same sequence of 10 digits?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
College Algebra (MindTap Course List)AlgebraISBN:9781305652231Author:R. David Gustafson, Jeff HughesPublisher:Cengage Learning
Glencoe Algebra 1, Student Edition, 9780079039897...AlgebraISBN:9780079039897Author:CarterPublisher:McGraw Hill
Holt Mcdougal Larson Pre-algebra: Student Edition...AlgebraISBN:9780547587776Author:HOLT MCDOUGALPublisher:HOLT MCDOUGAL
College Algebra (MindTap Course List)
Algebra
ISBN:9781305652231
Author:R. David Gustafson, Jeff Hughes
Publisher:Cengage Learning
Glencoe Algebra 1, Student Edition, 9780079039897...
Algebra
ISBN:9780079039897
Author:Carter
Publisher:McGraw Hill
Holt Mcdougal Larson Pre-algebra: Student Edition...
Algebra
ISBN:9780547587776
Author:HOLT MCDOUGAL
Publisher:HOLT MCDOUGAL
Hypothesis Testing using Confidence Interval Approach; Author: BUM2413 Applied Statistics UMP;https://www.youtube.com/watch?v=Hq1l3e9pLyY;License: Standard YouTube License, CC-BY
Hypothesis Testing - Difference of Two Means - Student's -Distribution & Normal Distribution; Author: The Organic Chemistry Tutor;https://www.youtube.com/watch?v=UcZwyzwWU7o;License: Standard Youtube License