Introductory Statistics Plus Mylab Statistics With Pearson Etext -- Access Card Package (3rd Edition)
3rd Edition
ISBN: 9780135229996
Author: Robert Gould, Rebecca Wong, Colleen N. Ryan
Publisher: PEARSON
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Textbook Question
Chapter 2, Problem 37SE
Changing Multiple-Choice Answers When Told Not to Do So (Example 7) One of the authors wanted to determine the effect of changing answers on multiple-choice tests. She studied the tests given by another professor, who had told his students before their exams that if they had doubts about an answer they had written, they would be better off not changing their initial answer. The author went through the exams to look for erasures, which indicate that the first choice was changed. In these tests, there is only one correct answer for each question. Do the data support the view that students should not change their initial choice of an answer?
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Students have asked these similar questions
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.)
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?
We 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?
2
Chapter 2 Solutions
Introductory Statistics Plus Mylab Statistics With Pearson Etext -- Access Card Package (3rd Edition)
Ch. 2 - Pulse Rates The dotplot shown is for resting pulse...Ch. 2 - Glucose A dotplot of the glucose readings from 132...Ch. 2 - Pulse Rates The histogram shown is for pulse rates...Ch. 2 - Fast Food Calories The histogram shown is for...Ch. 2 - Pulse Rates (Example 1) The resting pulse rates...Ch. 2 - Post Office Customers A post office branch...Ch. 2 - Cereals The following dotplots show the number of...Ch. 2 - Coins’ Weights The weights of coins (in grams)...Ch. 2 - Sleep (Example 2) An instructor asks a class of...Ch. 2 - Parking Tickets A group of 80 drivers in a large...
Ch. 2 - Arm spans (Example 3) According to the ancient...Ch. 2 - Tuition The distribution of in-state annual...Ch. 2 - Pulse Rates (Example 4) From the histogram in...Ch. 2 - Fast Food Calories From the histogram shown in...Ch. 2 - BMI (Example 5) The histograms show the Body Mass...Ch. 2 - Triglycerides The histograms show triglyceride...Ch. 2 - Education (Example 6) In 2012, the General Social...Ch. 2 - Siblings The histogram shows the distribution of...Ch. 2 - Monthly Car Costs The histograms show the monthly...Ch. 2 - Car MPG The histograms show the miles per gallon...Ch. 2 - Matching Histograms Match each of the three...Ch. 2 - Matching Match each histogram given with the...Ch. 2 - Matching Match each description with the correct...Ch. 2 - Matching Match each description with the correct...Ch. 2 - Comparing Weights of Olympic Hockey and Soccer...Ch. 2 - Rents in San Francisco The data show monthly rents...Ch. 2 - Textbook Prices The table shows prices of 50...Ch. 2 - SAT scores The following table shows a random...Ch. 2 - Animal Longevity The following table in Exercise...Ch. 2 - Animal Gestation Periods The accompanying table...Ch. 2 - Tax Rate A StatCrunch survey asked people what...Ch. 2 - Pets A StatCrunch survey asked people whether they...Ch. 2 - Law School Tuition Data are shown for the cost of...Ch. 2 - Text Messages Recently, 115 users of StatCrunch...Ch. 2 - Beer, Calories Data are available on the number of...Ch. 2 - Beer, Alcohol Data are available on the percent...Ch. 2 - Changing Multiple-Choice Answers When Told Not to...Ch. 2 - Preventable Deaths According to the World Health...Ch. 2 - Ice Cream Preference (Example 8) Suppose a group...Ch. 2 - Prob. 40SECh. 2 - Gun Availability Pew Research conducted a survey...Ch. 2 - Entry-Level Education The Bureau of Labor...Ch. 2 - Obesity Among Adults (Example 9) Data on obesity...Ch. 2 - Fitness Among Adults Data on the percentage of...Ch. 2 - Internet Browsers The following table gives the...Ch. 2 - Commercial Radio The following table gives the...Ch. 2 - Garage The accompanying graph shows the...Ch. 2 - Body Image A student has gathered data on...Ch. 2 - Pie Chart of Sleep Hours The pie chart reports the...Ch. 2 - Age and Gender The following graph shows the ages...Ch. 2 - Musicians Survey: StatCrunch Graph The...Ch. 2 - Cell Phone Use Refer to the accompanying bar...Ch. 2 - Sleep The following table shows the first few...Ch. 2 - Majors The following table shows the first few...Ch. 2 - Hormone Replacement Therapy The use of the drug...Ch. 2 - E-Music The bar graph shows information reported...Ch. 2 - Hormone Replacement Therapy Again The following...Ch. 2 - Holding Your Breath A group of students held their...Ch. 2 - Global Temperatures The histograms show the...Ch. 2 - Employment after Law School Accredited law schools...Ch. 2 - Opinions on Nuclear Energy People were asked...Ch. 2 - Stem Cell Research People were asked whether they...Ch. 2 - Create a dotplot that has at least 10 observations...Ch. 2 - Create a dotplot that has at least 10 observations...Ch. 2 - Traffic Cameras College students Jeannette Mujica,...Ch. 2 - Ideal Weight Thirty-nine students (26 women and 13...Ch. 2 - MPH The graphs show the distribution of...Ch. 2 - Shoe Sizes The graph shows shoe sizes for men and...Ch. 2 - CEO Salaries Predict the shape of the distribution...Ch. 2 - Cigarettes A physician asks all of his patients to...Ch. 2 - Changing Multiple-Choice Answers When Told to Do...Ch. 2 - ER Visits for Injuries The graph shows the rates...Ch. 2 - Social Media Use The Pew Research Center documents...Ch. 2 - Social Media Use The Pew Research Center gathered...Ch. 2 - Choosing a Graph For each situation, describe the...Ch. 2 - Choosing a Graph For each situation, describe the...
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