State the hypothesis.

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Answer 1

Question

Chapter 11.2, Problem 8SE

a.

To determine

State the hypothesis.

b.

To determine

Perform one-factor ANOVA at α=0.05.

c.

To determine

Explain the conclusions.

c.

To determine

Compute the critical value of F at the 5 percent level of significance.

d.

To determine

Interpret the p-value.

e.

To determine

Make a plot of the data for each plot and explain the plot.

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Problem 3. Pricing a multi-stock option the Margrabe formula The purpose of this problem is to price a swap option in a 2-stock model, similarly as what we did in the example in the lectures. We consider a two-dimensional Brownian motion given by W₁ = (W(¹), W(2)) on a probability space (Q, F,P). Two stock prices are modeled by the following equations: dX = dY₁ = X₁ (rdt+ rdt+0₁dW!) (²)), Y₁ (rdt+dW+0zdW!"), with Xo xo and Yo =yo. This corresponds to the multi-stock model studied in class, but with notation (X+, Y₁) instead of (S(1), S(2)). Given the model above, the measure P is already the risk-neutral measure (Both stocks have rate of return r). We write σ = 0₁+0%. We consider a swap option, which gives you the right, at time T, to exchange one share of X for one share of Y. That is, the option has payoff F=(Yr-XT). (a) We first assume that r = 0 (for questions (a)-(f)). Write an explicit expression for the process Xt. Reminder before proceeding to question (b): Girsanov's theorem…

Problem 1. Multi-stock model We consider a 2-stock model similar to the one studied in class. Namely, we consider = S(1) S(2) = S(¹) exp (σ1B(1) + (M1 - 0/1 ) S(²) exp (02B(2) + (H₂- M2 where (B(¹) ) +20 and (B(2) ) +≥o are two Brownian motions, with t≥0 Cov (B(¹), B(2)) = p min{t, s}. " The purpose of this problem is to prove that there indeed exists a 2-dimensional Brownian motion (W+)+20 (W(1), W(2))+20 such that = S(1) S(2) = = S(¹) exp (011W(¹) + (μ₁ - 01/1) t) 롱) S(²) exp (021W (1) + 022W(2) + (112 - 03/01/12) t). where σ11, 21, 22 are constants to be determined (as functions of σ1, σ2, p). Hint: The constants will follow the formulas developed in the lectures. (a) To show existence of (Ŵ+), first write the expression for both W. (¹) and W (2) functions of (B(1), B(²)). as (b) Using the formulas obtained in (a), show that the process (WA) is actually a 2- dimensional standard Brownian motion (i.e. show that each component is normal, with mean 0, variance t, and that their…

The scores of 8 students on the midterm exam and final exam were as follows. Student Midterm Final Anderson 98 89 Bailey 88 74 Cruz 87 97 DeSana 85 79 Erickson 85 94 Francis 83 71 Gray 74 98 Harris 70 91 Find the value of the (Spearman's) rank correlation coefficient test statistic that would be used to test the claim of no correlation between midterm score and final exam score. Round your answer to 3 places after the decimal point, if necessary. Test statistic: rs =

Answer 2

Question

Chapter 11.2, Problem 8SE

a.

To determine

State the hypothesis.

b.

To determine

Perform one-factor ANOVA at α=0.05.

c.

To determine

Explain the conclusions.

c.

To determine

Compute the critical value of F at the 5 percent level of significance.

d.

To determine

Interpret the p-value.

e.

To determine

Make a plot of the data for each plot and explain the plot.

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Answer 3

Question

Chapter 11.2, Problem 8SE

a.

To determine

State the hypothesis.

b.

To determine

Perform one-factor ANOVA at α=0.05.

c.

To determine

Explain the conclusions.

c.

To determine

Compute the critical value of F at the 5 percent level of significance.

d.

To determine

Interpret the p-value.

e.

To determine

Make a plot of the data for each plot and explain the plot.

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Answer 4

Question

Chapter 11.2, Problem 8SE

a.

To determine

State the hypothesis.

b.

To determine

Perform one-factor ANOVA at α=0.05.

c.

To determine

Explain the conclusions.

c.

To determine

Compute the critical value of F at the 5 percent level of significance.

d.

To determine

Interpret the p-value.

e.

To determine

Make a plot of the data for each plot and explain the plot.

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Answer 5

Chapter 11.2, Problem 8SE

a.

To determine

State the hypothesis.

b.

To determine

Perform one-factor ANOVA at α=0.05.

c.

To determine

Explain the conclusions.

c.

To determine

Compute the critical value of F at the 5 percent level of significance.

d.

To determine

Interpret the p-value.

e.

To determine

Make a plot of the data for each plot and explain the plot.

Answer 6

Chapter 11.2, Problem 8SE

a.

To determine

State the hypothesis.

Answer 7

Chapter 11.2, Problem 8SE

a.

To determine

State the hypothesis.

Answer 8

b.

To determine

Perform one-factor ANOVA at α=0.05.

Answer 9

b.

To determine

Perform one-factor ANOVA at α=0.05.

Answer 10

c.

To determine

Explain the conclusions.

Answer 11

c.

To determine

Explain the conclusions.

Answer 12

c.

To determine

Compute the critical value of F at the 5 percent level of significance.

Answer 13

c.

To determine

Compute the critical value of F at the 5 percent level of significance.

Answer 14

d.

To determine

Interpret the p-value.

Answer 15

d.

To determine

Interpret the p-value.

Answer 16

e.

To determine

Make a plot of the data for each plot and explain the plot.

Answer 17

e.

To determine

Make a plot of the data for each plot and explain the plot.

Answer 18

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Answer 19

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Answer 20

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Answer 21

Ch. 11.2 - Using the following Excel results: (a) What was...Ch. 11.2 - Using the following Excel results: (a) What was...Ch. 11.2 - In a one-factor ANOVA with sample sizes n1 = 5, n2...Ch. 11.2 - In a one-factor ANOVA with sample sizes n1 = 8, n2...Ch. 11.2 - Instructions for Exercises 11.5 through 11.8: For...Ch. 11.2 - Instructions for Exercises 11.5 through 11.8: For...Ch. 11.2 - Instructions for Exercises 11.5 through 11.8: For...Ch. 11.2 - Prob. 8SE Ch. 11.3 - Consider a one-factor ANOVA with n1 = 9, n2 = 10,...Ch. 11.3 - Consider a one-factor ANOVA with n1 = 6, n2 = 5,...

State the hypothesis.

State the hypothesis.

Perform one-factor ANOVA at α=0.05.

Explain the conclusions.

Compute the critical value of F at the 5 percent level of significance.

Interpret the p-value.

Make a plot of the data for each plot and explain the plot.

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Chapter 11 Solutions