Business Analytics
3rd Edition
ISBN: 9780135231715
Author: Evans
Publisher: PEARSON
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Chapter 4, Problem 74PE
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We consider the one-period model studied in class as an example. Namely, we assumethat the current stock price is S0 = 10. At time T, the stock has either moved up toSt = 12 (with probability p = 0.6) or down towards St = 8 (with probability 1−p = 0.4).We consider a call option on this stock with maturity T and strike price K = 10. Theinterest rate on the money market is zero.As in class, we assume that you, as a customer, are willing to buy the call option on100 shares of stock for $120. The investor, who sold you the option, can adopt one of thefollowing strategies: Strategy 1: (seen in class) Buy 50 shares of stock and borrow $380. Strategy 2: Buy 55 shares of stock and borrow $430. Strategy 3: Buy 60 shares of stock and borrow $480. Strategy 4: Buy 40 shares of stock and borrow $280.(a) For each of strategies 2-4, describe the value of the investor’s portfolio at time 0,and at time T for each possible movement of the stock.(b) For each of strategies 2-4, does the investor have…
Negate the following compound statement using De Morgans's laws.
Negate the following compound statement using De Morgans's laws.
Chapter 4 Solutions
Business Analytics
Ch. 4 - Prob. 1PECh. 4 - Classify each of the data elements in the Sales...Ch. 4 - Identify each of the variables in the Excel file...Ch. 4 - Classify each of the variables in the Excel file...Ch. 4 - Use the COUNTIF function to construct a frequency...Ch. 4 - A community health status survey obtained the...Ch. 4 - Construct frequency distributions and histograms...Ch. 4 - Use the Histogram tool to develop a frequency...Ch. 4 - Prob. 12PECh. 4 - Use a PivotTable to construct a frequency...
Ch. 4 - Prob. 14PECh. 4 - Find the 20thand80th percentiles of home prices in...Ch. 4 - Find the 10thand90th percentiles and the first and...Ch. 4 - Prob. 18PECh. 4 - Find the first, second, and third quartiles for...Ch. 4 - Prob. 20PECh. 4 - Prob. 21PECh. 4 - Find the mean, median, and midrange for the data...Ch. 4 - In the Excel file Facebook Survey, find the mean,...Ch. 4 - Considering the data in the Excel file Home Market...Ch. 4 - Considering the data in the Excel file Home Market...Ch. 4 - In the Excel file Facebook Survey, find the range,...Ch. 4 - For the Excel file Tablet Computer Sales, find the...Ch. 4 - The Excel file Atlanta Airline Data provides...Ch. 4 - Compute the coefficient of variation for each...Ch. 4 - Find 30 days of stock prices for three companies...Ch. 4 - Apply the Descriptive Statistics tool for subsets...Ch. 4 - Use the Descriptive Statistics tool to summarize...Ch. 4 - Prob. 39PECh. 4 - Prob. 42PECh. 4 - Prob. 43PECh. 4 - Prob. 44PECh. 4 - Prob. 45PECh. 4 - In the Excel file Bicycle Inventory, find the...Ch. 4 - Prob. 48PECh. 4 - Prob. 49PECh. 4 - Prob. 50PECh. 4 - Prob. 51PECh. 4 - Prob. 52PECh. 4 - Prob. 55PECh. 4 - Prob. 56PECh. 4 - Prob. 57PECh. 4 - Prob. 58PECh. 4 - Prob. 59PECh. 4 - In the Excel file Weddings, determine the...Ch. 4 - Prob. 61PECh. 4 - Prob. 62PECh. 4 - For the Presidents Inn Guest Database, find the...Ch. 4 - For the Excel file Credit Risk Data, compute the...Ch. 4 - Compute the z-scores for the data in the Excel...Ch. 4 - Prob. 67PECh. 4 - Prob. 68PECh. 4 - Prob. 70PECh. 4 - Prob. 71PECh. 4 - Prob. 73PECh. 4 - Prob. 74PECh. 4 - Prob. 75PE
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- Question 6: Negate the following compound statements, using De Morgan's laws. A) If Alberta was under water entirely then there should be no fossil of mammals.arrow_forwardNegate the following compound statement using De Morgans's laws.arrow_forwardCharacterize (with proof) all connected graphs that contain no even cycles in terms oftheir blocks.arrow_forward
- Let G be a connected graph that does not have P4 or C3 as an induced subgraph (i.e.,G is P4, C3 free). Prove that G is a complete bipartite grapharrow_forwardProve sufficiency of the condition for a graph to be bipartite that is, prove that if G hasno odd cycles then G is bipartite as follows:Assume that the statement is false and that G is an edge minimal counterexample. That is, Gsatisfies the conditions and is not bipartite but G − e is bipartite for any edge e. (Note thatthis is essentially induction, just using different terminology.) What does minimality say aboutconnectivity of G? Can G − e be disconnected? Explain why if there is an edge between twovertices in the same part of a bipartition of G − e then there is an odd cyclearrow_forwardLet G be a connected graph that does not have P4 or C4 as an induced subgraph (i.e.,G is P4, C4 free). Prove that G has a vertex adjacent to all othersarrow_forward
- We consider a one-period market with the following properties: the current stock priceis S0 = 4. At time T = 1 year, the stock has either moved up to S1 = 8 (with probability0.7) or down towards S1 = 2 (with probability 0.3). We consider a call option on thisstock with maturity T = 1 and strike price K = 5. The interest rate on the money marketis 25% yearly.(a) Find the replicating portfolio (φ, ψ) corresponding to this call option.(b) Find the risk-neutral (no-arbitrage) price of this call option.(c) We now consider a put option with maturity T = 1 and strike price K = 3 onthe same market. Find the risk-neutral price of this put option. Reminder: A putoption gives you the right to sell the stock for the strike price K.1(d) An investor with initial capital X0 = 0 wants to invest on this market. He buysα shares of the stock (or sells them if α is negative) and buys β call options (orsells them is β is negative). He invests the cash balance on the money market (orborrows if the amount is…arrow_forwardDetermine if the two statements are equivalent using a truth tablearrow_forwardQuestion 4: Determine if pair of statements A and B are equivalent or not, using truth table. A. (~qp)^~q в. р л~9arrow_forward
- Determine if the two statements are equalivalent using a truth tablearrow_forwardQuestion 3: p and q represent the following simple statements. p: Calgary is the capital of Alberta. A) Determine the value of each simple statement p and q. B) Then, without truth table, determine the va q: Alberta is a province of Canada. for each following compound statement below. pvq р^~q ~рл~q ~q→ p ~P~q Pq b~ (d~ ← b~) d~ (b~ v d) 0 4arrow_forward2. Let X be a random variable. (a) Show that, if E X2 = 1 and E X4arrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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