A Transition to Advanced Mathematics
8th Edition
ISBN: 9781285463261
Author: Douglas Smith, Maurice Eggen, Richard St. Andre
Publisher: Cengage Learning
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Chapter 2.5, Problem 14E
To determine
To Evaluate: The correctness of the given proof.
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10. In the general single period market model with = {W1, W2, W3}, one risky asset, S, and
a money market account, we have So = 4 for the risky asset. Moreover, the effective
rate of interest on the money market account is 5% and at time t = 1 we have
W1
W2 W3
S₁
100 50 40
21
21
21
(a) Calculate all risk-neutral probability measures for this model. [4 Marks]
(b) State if the model is arbitrage-free. Give a brief reason for your answer. [2 Marks]
(c) A large bank has designed an investment product with payoff X at time t = 1.
Given
W₁
W2
W3
X
0
1
1.5
show that X is an attainable contingent claim. [4 marks]
added 2 images
A movie studio wishes to determine the relationship between the revenue generated from the streaming of comedies and the revenue generated from the
theatrical release of such movies. The studio has the following bivariate data from a sample of fifteen comedies released over the past five years. These data
give the revenue x from theatrical release (in millions of dollars) and the revenue y from streaming (in millions of dollars) for each of the fifteen movies. The
data are displayed in the Figure 1 scatter plot.
Theater
revenue, x
Streaming
revenue, y
(in millions of (in millions of
dollars)
dollars)
13.2
10.3
62.6
10.4
20.8
5.1
36.7
13.3
44.6
7.2
65.9
10.3
49.4
15.7
31.5
4.5
14.6
2.5
26.0
8.8
28.1
11.5
26.1
7.7
28.2
2.8
60.7
16.4
6.7
1.9
Streaming
revenue
(in millions of dollars)
18+
16+
14
12+
xx
10+
8+
6+
2-
0
10
20 30 40
50
60
70
Theater revenue
(in millions of dollars)
Figure 1
Send data to calculator
Send data to Excel
The least-squares regression line for these data has a slope…
Chapter 2 Solutions
A Transition to Advanced Mathematics
Ch. 2.1 - The Cayley tables for operations o,*,+, and are...Ch. 2.1 - Let m,n and M=A:A is an mn matrix with real number...Ch. 2.1 - Let be an associative operation on nonempty set A...Ch. 2.1 - Let be an associative operation on nonempty set A...Ch. 2.1 - Suppose that (A,*) is an algebraic system and * is...Ch. 2.1 - Let (A,o) be an algebra structure. An element lA...Ch. 2.1 - Let G be a group. Prove that if a2=e for all aG,...Ch. 2.1 - Give an example of an algebraic structure of order...Ch. 2.1 - Prob. 9ECh. 2.1 - Construct the operation table for each of the...
Ch. 2.1 - Prob. 11ECh. 2.1 - Prob. 12ECh. 2.1 - Suppose m and m2. Prove that 1 and m1 are distinct...Ch. 2.1 - Let m and a be natural numbers with am. Complete...Ch. 2.1 - Complete the proof of Theorem 6.1.4. First, show...Ch. 2.1 - Prob. 16ECh. 2.1 - Prob. 17ECh. 2.1 - Prob. 18ECh. 2.1 - Repeat Exercise 2 with the operation * given by...Ch. 2.2 - Prob. 1ECh. 2.2 - Let G be a group and aiG for all n. Prove that...Ch. 2.2 - Prove part (d) of Theorem 6.2.3. That is, prove...Ch. 2.2 - Prove part (b) of Theorem 6.2.4.Ch. 2.2 - List all generators of each cyclic group in...Ch. 2.2 - Let G be a group with identity e. Let aG. Prove...Ch. 2.2 - Let G be a group, and let H be a subgroup of G....Ch. 2.2 - Let ({0},) be the group of nonzero complex numbers...Ch. 2.2 - Prove that for every natural number m greater than...Ch. 2.2 - Show that the structure ({1},), with operation ...Ch. 2.2 - (a)In the group G of Exercise 2, find x such that...Ch. 2.2 - Show that (,), with operation # defined by...Ch. 2.2 - Prob. 13ECh. 2.2 - Prob. 14ECh. 2.2 - Prob. 15ECh. 2.2 - Show that each of the following algebraic...Ch. 2.2 - Prob. 17ECh. 2.2 - Given that G={e,u,v,w} is a group of order 4 with...Ch. 2.2 - Give an example of an algebraic system (G,o) that...Ch. 2.2 - (a)What is the order of S4, the symmetric group on...Ch. 2.3 - Find the order of the element 3 in each group....Ch. 2.3 - Find the order of each element of the group S3....Ch. 2.3 - Let 3 and 6 be the sets of integer multiples of 3...Ch. 2.3 - Let (3,+) and (6,+) be the groups in Exercise 10,...Ch. 2.3 - Let ({a,b,c},o) be the group with the operation...Ch. 2.3 - (a)Prove that the function f:1824 given by f(x)=4x...Ch. 2.3 - Define f:1512 by f(x)=4x. Prove that f is a...Ch. 2.3 - Let (G,) and (H,*) be groups, i be the identity...Ch. 2.3 - Show that (4,+) and ({1,1,i,i},) are isomorphic.Ch. 2.3 - Prove that every subgroup of a cyclic group is...Ch. 2.3 - Let G=a be a cyclic group of order 30. What is the...Ch. 2.3 - Assign a grade of A (correct), C (partially...Ch. 2.3 - Find all subgroups of (8,+). (U11,). (5,+). (U7,)....Ch. 2.3 - In the group S4, find two different subgroups that...Ch. 2.3 - Prove that if G is a group and H is a subgroup of...Ch. 2.3 - (a)Prove that if H and K are subgroups of a group...Ch. 2.3 - Let G be a group and H be a subgroup of G. If H is...Ch. 2.3 - Prove or disprove: Every abelian group is cyclic.Ch. 2.3 - Let G be a group. If H is a subgroup of G and K is...Ch. 2.4 - Define f:++ by f(x)=x where + is the set of all...Ch. 2.4 - Assign a grade of A (correct), C (partially...Ch. 2.4 - Define f: by f(x)=x3. Is f:(,+)(,+) operation...Ch. 2.4 - Define on by setting (a,b)(c,d)=(acbd,ad+bc)....Ch. 2.4 - Let f the set of all real-valued integrable...Ch. 2.4 - Prob. 6ECh. 2.4 - Let M be the set of all 22 matrices with real...Ch. 2.4 - Let Conj: be the conjugate mapping for complex...Ch. 2.4 - Prove the remaining parts of Theorem 6.4.1.Ch. 2.4 - Is S3 isomorphic to (6,+)? Explain.Ch. 2.4 - Prob. 11ECh. 2.4 - Use the method of proof of Cayley's Theorem to...Ch. 2.5 - Let (R,+,) be an algebraic structure such that...Ch. 2.5 - Assign a grade of A (correct), C (partially...Ch. 2.5 - Which of the following is a ring with the usual...Ch. 2.5 - Let [2] be the set {a+b2:a,b}. Define addition and...Ch. 2.5 - Complete the proof that for every m,(m+,) is a...Ch. 2.5 - Define addition and multiplication on the set ...Ch. 2.5 - Prob. 7ECh. 2.5 - Let (R,+,) be a ring and a,b,R. Prove that b+(a)...Ch. 2.5 - Prove the remaining parts of Theorem 6.5.3: For...Ch. 2.5 - Prob. 10ECh. 2.5 - Prob. 11ECh. 2.5 - Prob. 12ECh. 2.5 - Prob. 13ECh. 2.5 - Prob. 14ECh. 2.6 - Prob. 1ECh. 2.6 - Let A and B be subsets of . Prove that if sup(A)...Ch. 2.6 - (a)Give an example of sets A and B of real numbers...Ch. 2.6 - (a)Give an example of sets A and B of real numbers...Ch. 2.6 - Prob. 5ECh. 2.6 - Prob. 6ECh. 2.6 - Prob. 7ECh. 2.6 - Prob. 8ECh. 2.6 - Prob. 9ECh. 2.6 - Prob. 10ECh. 2.6 - Prob. 11ECh. 2.6 - Prob. 12ECh. 2.6 - Prob. 13ECh. 2.6 - Prob. 14ECh. 2.6 - Prob. 15ECh. 2.6 - Prob. 16ECh. 2.6 - Use the definition of “divides” to explain (a) why...Ch. 2.6 - Prob. 18ECh. 2.6 - Prob. 19ECh. 2.6 - Prob. 20ECh. 2.6 - For each function, find the value of f at 3 and...Ch. 2.6 - Let A be the set {1,2,3,4} and B={0,1,2,3}. Give a...Ch. 2.6 - Formulate and prove a characterization of greatest...Ch. 2.6 - Prob. 24ECh. 2.6 - Prob. 25E
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- help on this, results givenarrow_forwarda) Suppose that we are carrying out the 1-phase simplex algorithm on a linear program in standard inequality form (with 3 variables and 4 constraints) and suppose that we have reached a point where we have obtained the following tableau. Apply one more pivot operation, indicating the highlighted row and column and the row operations you carry out. What can you conclude from your updated tableau? x1 x2 x3 81 82 83 84 81 -2 0 1 1 0 0 0 3 82 3 0 -2 0 1 2 0 6 12 1 1 -3 0 0 1 0 2 84 -3 0 2 0 0 -1 1 4 -2 -2 0 11 0 0-4 0 -8arrow_forwardb) Solve the following linear program using the 2-phase simplex algorithm. You should give the initial tableau, and each further tableau produced during the execution of the algorithm. If the program has an optimal solution, give this solution and state its objective value. If it does not have an optimal solution, say why. maximize ₁ - 2x2+x34x4 subject to 2x1+x22x3x41, 5x1 + x2-x3-×4 ≤ −1, 2x1+x2-x3-34 2, 1, 2, 3, 40.arrow_forward
- 9. An elementary single period market model contains a risk-free asset with interest rate r = 5% and a risky asset S which has price 30 at time t = 0 and will have either price 10 or 60 at time t = 1. Find a replicating strategy for a contingent claim with payoff h(S₁) = max(20 - S₁, 0) + max(S₁ — 50, 0). Total [8 Marks]arrow_forward8. An elementary single period market model has a risky asset with price So = 20 at the beginning and a money market account with interest rate r = 0.04 compounded only once at the end of the investment period. = = In market model A, S₁ 10 with 15% probability and S₁ 21 with 85% probability. In market model B, S₁ = 25 with 10% probability and S₁ = 30 with 90% probability. For each market model A, B, determine if the model is arbitrage-free. If not, construct an arbitrage. Total [9 Marks]arrow_forwardb) Solve the following linear program using the 2-phase simplex algorithm. You should give the initial tableau, and each further tableau produced during the execution of the algorithm. If the program has an optimal solution, give this solution and state its objective value. If it does not have an optimal solution, say why. maximize ₁ - 2x2+x34x4 subject to 2x1+x22x3x41, 5x1 + x2-x3-×4 ≤ −1, 2x1+x2-x3-34 2, 1, 2, 3, 40.arrow_forward
- Suppose we have a linear program in standard equation form maximize cTx subject to Ax = b. x ≥ 0. and suppose u, v, and w are all optimal solutions to this linear program. (a) Prove that zu+v+w is an optimal solution. (b) If you try to adapt your proof from part (a) to prove that that u+v+w is an optimal solution, say exactly which part(s) of the proof go wrong. (c) If you try to adapt your proof from part (a) to prove that u+v-w is an optimal solution, say exactly which part(s) of the proof go wrong.arrow_forwarda) Suppose that we are carrying out the 1-phase simplex algorithm on a linear program in standard inequality form (with 3 variables and 4 constraints) and suppose that we have reached a point where we have obtained the following tableau. Apply one more pivot operation, indicating the highlighted row and column and the row operations you carry out. What can you conclude from your updated tableau? x1 x2 x3 81 82 83 84 81 -2 0 1 1 0 0 0 3 82 3 0 -2 0 1 2 0 6 12 1 1 -3 0 0 1 0 2 84 -3 0 2 0 0 -1 1 4 -2 -2 0 11 0 0-4 0 -8arrow_forwardPlease solve number 2.arrow_forward
- Construct a know-show table of the proposition: For each integer n, n is even if and only if 4 divides n^2arrow_forwardIn Problems 1 and 2 find the eigenfunctions and the equation that defines the eigenvalues for the given boundary-value problem. Use a CAS to approximate the first four eigenvalues A1, A2, A3, and A4. Give the eigenfunctions corresponding to these approximations. 1. y" + Ay = 0, y'(0) = 0, y(1) + y'(1) = 0arrow_forwardFind the closed formula for each of the following sequences (a_n)_n>=1 by realting them to a well known sequence. Assume the first term given is a_1 d. 5,23,119,719,5039 i have tried finding the differnces and the second difference and i still dont see the patternarrow_forward
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