Introduction To Probability And Statistics
15th Edition
ISBN: 9781337554428
Author: Mendenhall, William.
Publisher: Cengage Learning,
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Chapter 1.1, Problem 5E
Experimental UnitsDefine the experimental units for the variables described in Exercises 1−5.
5. Color of a car entering a parking lot
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Problem1
We consider a two-period binomial model with the following properties: each period lastsone (1) year and the current stock price is S0 = 4. On each period, the stock price doubleswhen it moves up and is reduced by half when it moves down. The annual interest rateon the money market is 25%. (This model is the same as in Prob. 1 of HW#2).We consider four options on this market: A European call option with maturity T = 2 years and strike price K = 5; A European put option with maturity T = 2 years and strike price K = 5; An American call option with maturity T = 2 years and strike price K = 5; An American put option with maturity T = 2 years and strike price K = 5.(a) Find the price at time 0 of both European options.(b) Find the price at time 0 of both American options. Compare your results with (a)and comment.(c) For each of the American options, describe the optimal exercising strategy.
Problem 1.We consider a two-period binomial model with the following properties: each period lastsone (1) year and the current stock price is S0 = 4. On each period, the stock price doubleswhen it moves up and is reduced by half when it moves down. The annual interest rateon the money market is 25%.
We consider four options on this market: A European call option with maturity T = 2 years and strike price K = 5; A European put option with maturity T = 2 years and strike price K = 5; An American call option with maturity T = 2 years and strike price K = 5; An American put option with maturity T = 2 years and strike price K = 5.(a) Find the price at time 0 of both European options.(b) Find the price at time 0 of both American options. Compare your results with (a)and comment.(c) For each of the American options, describe the optimal exercising strategy.(d) We assume that you sell the American put to a market participant A for the pricefound in (b). Explain how you act on the market…
What is the standard scores associated to the left of z is 0.1446
Chapter 1 Solutions
Introduction To Probability And Statistics
Ch. 1.1 - Experimental UnitsDefine the experimental units...Ch. 1.1 - Experimental UnitsDefine the experimental units...Ch. 1.1 - Experimental UnitsDefine the experimental units...Ch. 1.1 - Experimental UnitsDefine the experimental units...Ch. 1.1 - Experimental UnitsDefine the experimental units...Ch. 1.1 - Qualitative or Quantitative? Are the variables in...Ch. 1.1 - Qualitative or Quantitative? Are the variables in...Ch. 1.1 - Qualitative or Quantitative? Are the variables in...Ch. 1.1 - Qualitative or Quantitative? Are the variables in...Ch. 1.1 - Discrete or Continuous? Are the variables in...
Ch. 1.1 - Discrete or Continuous? Are the variables in...Ch. 1.1 - Discrete or Continuous? Are the variables in...Ch. 1.1 - Discrete or Continuous? Are the variables in...Ch. 1.1 - Discrete or Continuous? Are the variables in...Ch. 1.1 - Discrete or Continuous? Are the variables in...Ch. 1.1 - Discrete or Continuous? Are the variables in...Ch. 1.1 - Discrete or Continuous? Are the variables in...Ch. 1.1 - Discrete or Continuous? Are the variables in...Ch. 1.1 - Populations or Samples? In Exercises 1922,...Ch. 1.1 - Populations or Samples? In Exercises 1922,...Ch. 1.1 - Populations or Samples? In Exercises 1922,...Ch. 1.1 - Populations or Samples? In Exercises 1922,...Ch. 1.1 - Parking on Campus Six vehicles selected from a...Ch. 1.1 - Past U.S. Presidents A data set gives the ages at...Ch. 1.1 - Voter Attitudes You are a candidate for your state...Ch. 1.1 - Cancer Survival Times A researcher wants to...Ch. 1.1 - New Teaching Methods A researcher wants to know...Ch. 1.2 - Pie and Bar Charts The data in Exercises 13...Ch. 1.2 - Pie and Bar Charts The data in Exercises 13...Ch. 1.2 - Pie and Bar Charts The data in Exercises 13...Ch. 1.2 - Groups of People Fifty people are grouped into...Ch. 1.2 - Presidential Popularity After the elections of...Ch. 1.2 - Presidential Popularity After the elections of...Ch. 1.2 - Presidential Popularity After the elections of...Ch. 1.2 - Presidential Popularity After the elections of...Ch. 1.2 - Presidential Popularity After the elections of...Ch. 1.2 - Prob. 10ECh. 1.2 - Prob. 11ECh. 1.2 - Prob. 12ECh. 1.2 - Prob. 13ECh. 1.2 - Prob. 14ECh. 1.2 - Prob. 15ECh. 1.2 - Back to Work How long does it take you to adjust...Ch. 1.2 - Prob. 17ECh. 1.2 - Prob. 18ECh. 1.2 - Prob. 19ECh. 1.2 - Prob. 20ECh. 1.2 - Prob. 21ECh. 1.3 - DotplotsConstruct a dotplot for the data given in...Ch. 1.3 - DotplotsConstruct a dotplot for the data given in...Ch. 1.3 - Stem and Leaf I Construct a stem and leaf plot for...Ch. 1.3 - Stem and Leaf I Construct a stem and leaf plot for...Ch. 1.3 - Stem and Leaf I Construct a stem and leaf plot for...Ch. 1.3 - Stem and Leaf II Use the following set of data...Ch. 1.3 - Stem and Leaf II Use the following set of data...Ch. 1.3 - Prob. 8ECh. 1.3 - Prob. 9ECh. 1.3 - Comparing Graphs A discrete variable can take on...Ch. 1.3 - Prob. 11ECh. 1.3 - Prob. 12ECh. 1.3 - Prob. 13ECh. 1.3 - Prob. 14ECh. 1.3 - Prob. 15ECh. 1.3 - Prob. 16ECh. 1.3 - Prob. 17ECh. 1.3 - Calcium Contents The calcium content (Ca)of a...Ch. 1.3 - Prob. 19ECh. 1.3 - Prob. 20ECh. 1.3 - Prob. 21ECh. 1.3 - Prob. 22ECh. 1.3 - Prob. 23ECh. 1.3 - Prob. 24ECh. 1.3 - American Presidents The following table lists the...Ch. 1.4 - Graphing Relative Frequency Histograms Construct a...Ch. 1.4 - Graphing Relative Frequency Histograms Construct a...Ch. 1.4 - Interpreting Relative Frequency Histograms Use the...Ch. 1.4 - Interpreting Relative Frequency Histograms Use the...Ch. 1.4 - Interpreting Relative Frequency Histograms Use the...Ch. 1.4 - Interpreting Relative Frequency Histograms Use the...Ch. 1.4 - Interpreting Relative Frequency Histograms Use the...Ch. 1.4 - Interpreting Relative Frequency Histograms Use the...Ch. 1.4 - Class Boundaries In Exercises 912, use the...Ch. 1.4 - Class Boundaries In Exercises 912, use the...Ch. 1.4 - Prob. 11ECh. 1.4 - Prob. 12ECh. 1.4 - Prob. 13ECh. 1.4 - Prob. 14ECh. 1.4 - Relative Frequency Histogram I Construct a...Ch. 1.4 - Prob. 16ECh. 1.4 - Prob. 17ECh. 1.4 - Prob. 18ECh. 1.4 - Prob. 19ECh. 1.4 - Prob. 20ECh. 1.4 - Prob. 21ECh. 1.4 - Prob. 22ECh. 1.4 - Prob. 23ECh. 1.4 - Prob. 24ECh. 1.4 - A Recurring Illness The length of time (in months)...Ch. 1.4 - Prob. 26ECh. 1.4 - Prob. 27ECh. 1.4 - Prob. 28ECh. 1.4 - Prob. 29ECh. 1.4 - Prob. 30ECh. 1.4 - Prob. 31ECh. 1.4 - Student Heights The self-reported heights of 105...Ch. 1.4 - Prob. 33ECh. 1 - Quantitative or Qualitative? Identify each...Ch. 1 - Symmetric or Skewed? Do you expect the...Ch. 1 - Continuous or Discrete? Identify each variable as...Ch. 1 - Continuous or Discrete, again Identify each...Ch. 1 - World Lakes A lake is a body of water surrounded...Ch. 1 - Prob. 6RWYLCh. 1 - Election Results The 2016 election was a race in...Ch. 1 - Prob. 8RWYLCh. 1 - Prob. 9RWYLCh. 1 - Pulse Rates A group of 50 biomedical students...Ch. 1 - Prob. 11RWYLCh. 1 - Prob. 12RWYLCh. 1 - Gasoline Tax The following are the 2017 state...Ch. 1 - Prob. 14RWYLCh. 1 - Prob. 15RWYLCh. 1 - Prob. 16RWYLCh. 1 - Kentucky Derby The following data set shows the...Ch. 1 - Prob. 18RWYLCh. 1 - Old Faithful The following data are the waiting...Ch. 1 - Prob. 20RWYLCh. 1 - Prob. 1CSCh. 1 - Prob. 2CS
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- Note: The purpose of this problem below is to use computational techniques (Excelspreadsheet, Matlab, R, Python, etc.) and code the dynamic programming ideas seen inclass. Please provide the numerical answer to the questions as well as a sample of yourwork (spreadsheet, code file, etc.).We consider an N-period binomial model with the following properties: N = 60, thecurrent stock price is S0 = 1000; on each period, the stock price increases by 0.5% whenit moves up and decreases by 0.3% when it moves down. The annual interest rate on themoney market is 5%. (Notice that this model is a CRR model, which means that thebinomial tree is recombining.)(a) Find the price at time t0 = 0 of a (European) call option with strike price K = 1040and maturity T = 1 year.(b) Find the price at time t0 = 0 of a (European) put option with strike price K = 1040and maturity T = 1 year.(c) We consider now, that you are at time t5 (i.e. after 5 periods, which represents 1month later). Assume that the stock…arrow_forwardshow work in paperarrow_forwardshow all work (...or what you entered into your calculator...)arrow_forward
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