Finite Mathematics, Books a la Carte Plus MyLab Math Access Card Package (11th Edition)
11th Edition
ISBN: 9780133886818
Author: Margaret L. Lial, Raymond N. Greenwell, Nathan P. Ritchey
Publisher: PEARSON
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Textbook Question
Chapter 3.3, Problem 1E
Write Exercises 1–6 as linear inequalities. Identify all variables used. (Note: Not all of the given information is used in Exercises 5 and 6.)
Product A requires 3 hours on a machine, while product B needs 5 hours on the same machine. The machine is available for at most 60 hours per week.
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For each month of the year, Taylor collected the average high temperatures in Jackson, Mississippi. He used the data to create the histogram shown. Which set of data did he use to create the histogram?
A
55, 60, 64, 72, 73, 75, 77, 81, 83, 91, 91, 92\ 55,\ 60,\ 64,\ 72,\ 73,\ 75,\ 77,\ 81,\ 83,\ 91,\ 91,\ 92 55, 60, 64, 72, 73, 75, 77, 81, 83, 91, 91, 92
B
55, 57, 60, 65, 70, 71, 78, 79, 85, 86, 88, 91\ 55,\ 57,\ 60,\ 65,\ 70,\ 71,\ 78,\ 79,\ 85,\ 86,\ 88,\ 91 55, 57, 60, 65, 70, 71, 78, 79, 85, 86, 88, 91
C
55, 60, 63, 64, 65, 71, 83, 87, 88, 88, 89, 93\ 55,\ 60,\ 63,\ 64,\ 65,\ 71,\ 83,\ 87,\ 88,\ 88,\ 89,\ 93 55, 60, 63, 64, 65, 71, 83, 87, 88, 88, 89, 93
D
55, 58, 60, 66, 68, 75, 77, 82, 86, 89, 91, 91\ 55,\ 58,\ 60,\ 66,\ 68,\ 75,\ 77,\ 82,\ 86,\ 89,\ 91,\ 91 55, 58, 60, 66, 68, 75, 77, 82, 86, 89, 91, 91
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?
Chapter 3 Solutions
Finite Mathematics, Books a la Carte Plus MyLab Math Access Card Package (11th Edition)
Ch. 3.1 - Graph each linear inequality. x + y 2Ch. 3.1 - Graph each linear inequality. y x + 1Ch. 3.1 - Graph each linear inequality. x 2 yCh. 3.1 - Graph each linear inequality. y x 3Ch. 3.1 - Graph each linear inequality. 4x y 6Ch. 3.1 - Graph each linear inequality. 4y + x 6Ch. 3.1 - Graph each linear inequality. 7. 4x + y 8Ch. 3.1 - Graph each linear inequality. 2x y 2Ch. 3.1 - Graph each linear inequality. x + 3y 2Ch. 3.1 - Graph each linear inequality. 2x + 3y 6
Ch. 3.1 - Graph each linear inequality. x 3yCh. 3.1 - Graph each linear inequality. 2x yCh. 3.1 - Graph each linear inequality. x + y 0Ch. 3.1 - Graph each linear inequality. 3x + 2y 0Ch. 3.1 - Graph each linear inequality. y xCh. 3.1 - Graph each linear inequality. y 5xCh. 3.1 - Graph each linear inequality. x 4Ch. 3.1 - Graph each linear inequality. y 5Ch. 3.1 - Graph each linear inequality. y 2Ch. 3.1 - Graph each linear inequality. x 4Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Graph the feasible region for each system of...Ch. 3.1 - Prob. 35ECh. 3.1 - Prob. 36ECh. 3.1 - Prob. 37ECh. 3.1 - Prob. 38ECh. 3.1 - The regions A through G in the figure can be...Ch. 3.1 - Production Scheduling A small pottery shop makes...Ch. 3.1 - Time Management Carmella and Walt produce handmade...Ch. 3.1 - Prob. 42ECh. 3.1 - Prob. 43ECh. 3.1 - Prob. 44ECh. 3.1 - For Exercises 42-47, perform the following steps....Ch. 3.1 - Prob. 46ECh. 3.1 - Prob. 47ECh. 3.2 - The following graphs show regions of feasible...Ch. 3.2 - The following graphs show regions of feasible...Ch. 3.2 - The following graphs show regions of feasible...Ch. 3.2 - The following graphs show regions of feasible...Ch. 3.2 - The following graphs show regions of feasible...Ch. 3.2 - Prob. 6ECh. 3.2 - Prob. 7ECh. 3.2 - Use graphical methods to solve each linear...Ch. 3.2 - Prob. 9ECh. 3.2 - Use graphical methods to solve each linear...Ch. 3.2 - Prob. 11ECh. 3.2 - Prob. 12ECh. 3.2 - Prob. 13ECh. 3.2 - Prob. 14ECh. 3.2 - Prob. 15ECh. 3.2 - Use graphical methods to solve each linear...Ch. 3.2 - Use graphical methods to solve each linear...Ch. 3.3 - Write Exercises 16 as linear inequalities....Ch. 3.3 - Prob. 2ECh. 3.3 - Prob. 3ECh. 3.3 - Prob. 4ECh. 3.3 - Prob. 5ECh. 3.3 - Prob. 6ECh. 3.3 - Transportation The Miers Company produces small...Ch. 3.3 - Transportation A manufacturer of refrigerators...Ch. 3.3 - Finance A pension fund manager decides to invest a...Ch. 3.3 - Profit A small country can grow only two crops for...Ch. 3.3 - Prob. 11ECh. 3.3 - Revenue A candy company has 150 kg of...Ch. 3.3 - Blending The Mostpure Milk Company gets milk from...Ch. 3.3 - Profit The Muro Manufacturing Company makes two...Ch. 3.3 - Prob. 15ECh. 3.3 - Revenue The manufacturing process requires that...Ch. 3.3 - Prob. 17ECh. 3.3 - Manufacturing (Note: Exercises #x2013;20 are from...Ch. 3.3 - Prob. 19ECh. 3.3 - Prob. 20ECh. 3.3 - Life Sciences Health Care David Willis takes...Ch. 3.3 - Prob. 22ECh. 3.3 - Nutrition A dietician is planning a snack package...Ch. 3.3 - Prob. 24ECh. 3.3 - Anthropology An anthropology article presents a...Ch. 3.3 - Prob. 26ECh. 3.3 - Prob. 27ECh. 3 - Use sensitivity analysis to find the optimal...Ch. 3 - Prob. 2EACh. 3 - Prob. 3EACh. 3 - Prob. 4EACh. 3 - Prob. 5EACh. 3 - Prob. 1RECh. 3 - Prob. 2RECh. 3 - Prob. 3RECh. 3 - Prob. 4RECh. 3 - Prob. 5RECh. 3 - Prob. 6RECh. 3 - Prob. 7RECh. 3 - Prob. 8RECh. 3 - Prob. 9RECh. 3 - Prob. 10RECh. 3 - Prob. 11RECh. 3 - Prob. 12RECh. 3 - Prob. 13RECh. 3 - How many constraints are we limited to in the...Ch. 3 - Prob. 15RECh. 3 - Prob. 16RECh. 3 - Prob. 17RECh. 3 - Prob. 18RECh. 3 - Prob. 19RECh. 3 - Prob. 20RECh. 3 - Prob. 21RECh. 3 - Prob. 22RECh. 3 - Prob. 23RECh. 3 - Prob. 24RECh. 3 - Prob. 25RECh. 3 - Prob. 26RECh. 3 - Prob. 27RECh. 3 - Use the given regions to find the maximum and...Ch. 3 - Prob. 29RECh. 3 - Prob. 30RECh. 3 - Prob. 31RECh. 3 - Prob. 32RECh. 3 - Prob. 33RECh. 3 - Prob. 34RECh. 3 - Prob. 35RECh. 3 - Prob. 36RECh. 3 - Prob. 37RECh. 3 - Cost Analysis DeMarco's pizza shop makes two...Ch. 3 - Prob. 39RECh. 3 - Revenue How many pizzas of each kind should the...Ch. 3 - Prob. 41RECh. 3 - Prob. 42RECh. 3 - Steel A steel company produces two types of...Ch. 3 - Prob. 44RECh. 3 - Prob. 45RECh. 3 - Prob. 46RE
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