Basic Business Statistics, Student Value Edition (13th Edition)
13th Edition
ISBN: 9780321946393
Author: Mark L. Berenson, David M. Levine, Kathryn A. Szabat
Publisher: PEARSON
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Textbook Question
Chapter 2, Problem 54PS
How have stocks performed in the past? The following table presents the data stored in Stock Performance of a brand measure of stocks (by percentage) for each decade from the 1830s through the 2000s:
“Through December 15, 2009.
a. Construct a time-series plot of the stock performance from the 1830s to the 2000s.
b. Does there appear to be any pattern in the data?
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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 2 Solutions
Basic Business Statistics, Student Value Edition (13th Edition)
Ch. 2 - A categorical variable has three categories, with...Ch. 2 - The following data represent the responses to two...Ch. 2 - The following table, stored in smartphone sales,...Ch. 2 - The Edmunds.com NHTSA Complaints Activity Report...Ch. 2 - The 2013 Mortimer Spinks and Computer Weekly...Ch. 2 - The following table represents world oil...Ch. 2 - Visier’s Survey of Employers explores how North...Ch. 2 - A survey of 1,085 adults asked “Do you enjoy...Ch. 2 - Prob. 9PSCh. 2 - Do special recommendations increase ad...
Ch. 2 - Construct an ordered array, given the following...Ch. 2 - Construct an ordered array, given the following...Ch. 2 - Prob. 13PSCh. 2 - Prob. 14PSCh. 2 - Prob. 15PSCh. 2 - The file Utility contains the following data about...Ch. 2 - How much time do commuters living in or near...Ch. 2 - How do the average credit scores of people living...Ch. 2 - One operation of a mill is to cut pieces of steel...Ch. 2 - Prob. 20PSCh. 2 - Prob. 21PSCh. 2 - Prob. 22PSCh. 2 - The file Drink Contains the following data for the...Ch. 2 - Prob. 24PSCh. 2 - Prob. 25PSCh. 2 - Prob. 26PSCh. 2 - Prob. 27PSCh. 2 - Prob. 28PSCh. 2 - Prob. 29PSCh. 2 - Prob. 30PSCh. 2 - Prob. 31PSCh. 2 - Do special recommendations increase ad...Ch. 2 - Construct a stern-and-leaf display, given the...Ch. 2 - Construct an ordered array, given the following...Ch. 2 - The following is a stern-and0-leaf display...Ch. 2 - Prob. 36PSCh. 2 - The file MobileSpeed contains the overall download...Ch. 2 - The file Utility contains the following data about...Ch. 2 - Prob. 39PSCh. 2 - Prob. 40PSCh. 2 - How much time do Americans living in or near...Ch. 2 - How do the average credit scores of people living...Ch. 2 - One operation of a mill is to cut pieces of steel...Ch. 2 - Prob. 44PSCh. 2 - Prob. 45PSCh. 2 - Prob. 46PSCh. 2 - The data stored in Drink represents the amount of...Ch. 2 - The following is a set of data from a sample of...Ch. 2 - Prob. 49PSCh. 2 - Movie companies need to predict the gross receipts...Ch. 2 - Data were collected on the typical cost of dining...Ch. 2 - Prob. 52PSCh. 2 - Prob. 53PSCh. 2 - How have stocks performed in the past? The...Ch. 2 - Prob. 55PSCh. 2 - Prob. 56PSCh. 2 - The file Audits contains the number of audits of...Ch. 2 - Prob. 58PSCh. 2 - Prob. 59PSCh. 2 - Prob. 60PSCh. 2 - Using the sample of retirement funds stored in...Ch. 2 - Prob. 65PSCh. 2 - Prob. 66PSCh. 2 - Examine the following visualization, adapted from...Ch. 2 - Prob. 69PSCh. 2 - Prob. 70PSCh. 2 - How do histograms and polygons differ in...Ch. 2 - Why would you construct a summary table?Ch. 2 - What are the advantages and disadvantage of using...Ch. 2 - Compare and contrast the bar chart for categorical...Ch. 2 - What is the difference between a time-series plot...Ch. 2 - Why is it said that the main feature of a Pareto...Ch. 2 - What are the three different ways to break down...Ch. 2 - How can a multidimensional table differ from a...Ch. 2 - What type of insights can you gain from a...Ch. 2 - The following summary, table, presents the...Ch. 2 - The following table represents the market share...Ch. 2 - Prob. 82PSCh. 2 - The owner of a restaurant that services...Ch. 2 - Prob. 84PSCh. 2 - The following data represents the pounds per...Ch. 2 - Prob. 86PSCh. 2 - One of the major measures of the quality of...Ch. 2 - Prob. 88PSCh. 2 - Prob. 89PSCh. 2 - Prob. 90PSCh. 2 - Prob. 91PSCh. 2 - Prob. 92PSCh. 2 - What was the average price of a room at two-star,...Ch. 2 - The file Protein contains calorie and cholesterol...Ch. 2 - The file Natural Gas contains the U.S. monthly...Ch. 2 - Prob. 96PSCh. 2 - Prob. 97PSCh. 2 - A/B testing allows business to test a new design...
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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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