An Introduction to Mathematical Statistics and Its Applications (6th Edition)
6th Edition
ISBN: 9780134114217
Author: Richard J. Larsen, Morris L. Marx
Publisher: PEARSON
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Chapter 4.2, Problem 23Q
To determine
To test: That the
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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
An Introduction to Mathematical Statistics and Its Applications (6th Edition)
Ch. 4.2 - If a typist averages one misspelling in every 3250...Ch. 4.2 - A medical study recently documented that 905...Ch. 4.2 - Five hundred people are attending the first annual...Ch. 4.2 - A chromosome mutation linked with colorblindness...Ch. 4.2 - Suppose that 1% of all items in a supermarket are...Ch. 4.2 - A newly formed life insurance company has...Ch. 4.2 - According to an airline industry report (189),...Ch. 4.2 - Electromagnetic fields generated by power...Ch. 4.2 - Astronomers estimate that as many as one hundred...Ch. 4.2 - During the latter part of the nineteenth century,...
Ch. 4.2 - A random sample of three hundred fifty-six seniors...Ch. 4.2 - Midwestern Skies books ten commuter flights each...Ch. 4.2 - Prob. 13QCh. 4.2 - Prob. 14QCh. 4.2 - Prob. 15QCh. 4.2 - A tool and die press that stamps out cams used in...Ch. 4.2 - In a new fiber-optic communication system,...Ch. 4.2 - Assume that the number of hits, X, that a...Ch. 4.2 - Prob. 19QCh. 4.2 - Suppose a radioactive source is metered for two...Ch. 4.2 - Suppose that on-the-job injuries in a textile mill...Ch. 4.2 - Find P(X=4) if the random variable X has a Poisson...Ch. 4.2 - Prob. 23QCh. 4.2 - Prob. 24QCh. 4.2 - Prob. 25QCh. 4.2 - Prob. 26QCh. 4.2 - Records show that deaths occur at the rate of 0.1...Ch. 4.2 - Fifty spotlights have just been installed in an...Ch. 4.2 - Prob. 29QCh. 4.3 - Use Appendix Table A.1 to evaluate the following...Ch. 4.3 - Let Z be a standard normal random variable. Use...Ch. 4.3 - (a) Let 0ab. Which number is larger?...Ch. 4.3 - Prob. 4QCh. 4.3 - Assume that the random variable Z is described by...Ch. 4.3 - Prob. 6QCh. 4.3 - Prob. 7QCh. 4.3 - Hertz Brothers, a small, family-owned radio...Ch. 4.3 - Prob. 9QCh. 4.3 - State Techs basketball team, the Fighting...Ch. 4.3 - A random sample of 747 obituaries published...Ch. 4.3 - Prob. 12QCh. 4.3 - If pX(k)=(10k)(0.7)k(0.3)10k,k=0,1,10, is it...Ch. 4.3 - A sell-out crowd of 42,200 is expected at...Ch. 4.3 - A fair coin is tossed two hundred times. Let Xi=1...Ch. 4.3 - Suppose that one hundred fair dice are tossed....Ch. 4.3 - Let X be the amount won or lost in betting $5 on...Ch. 4.3 - Prob. 18QCh. 4.3 - An electronics firm receives, on the average,...Ch. 4.3 - Prob. 20QCh. 4.3 - Econo-Tire is planning an advertising campaign for...Ch. 4.3 - A large computer chip manufacturing plant under...Ch. 4.3 - Prob. 23QCh. 4.3 - Prob. 24QCh. 4.3 - A criminologist has developed a questionnaire for...Ch. 4.3 - The cross-sectional area of plastic tubing for use...Ch. 4.3 - At State University, the average score of the...Ch. 4.3 - A college professor teaches Chemistry 101 each...Ch. 4.3 - Suppose the random variable Y can be described by...Ch. 4.3 - It is estimated that 80% of all eighteen-year-old...Ch. 4.3 - Prob. 31QCh. 4.3 - Prob. 32QCh. 4.3 - The IQs of nine randomly selected people are...Ch. 4.3 - Let Y1,Y2,...,Yn be a random sample from a normal...Ch. 4.3 - A circuit contains three resistors wired in...Ch. 4.3 - Prob. 36QCh. 4.3 - Use moment-generating functions to prove the two...Ch. 4.3 - Let Y1,Y2,...,Y9 be a random sample of size 9 from...Ch. 4.3 - Prob. 39QCh. 4.4 - Because of her past convictions for mail fraud and...Ch. 4.4 - A teenager is trying to get a drivers license....Ch. 4.4 - Prob. 3QCh. 4.4 - Recently married, a young couple plans to continue...Ch. 4.4 - Show that the cdf for a geometric random variable...Ch. 4.4 - Suppose three fair dice are tossed repeatedly. Let...Ch. 4.4 - Prob. 7QCh. 4.4 - Sometimes the geometric random variable is defined...Ch. 4.4 - Prob. 9QCh. 4.4 - Suppose that the random variables X1 and X2 have...Ch. 4.5 - A door-to-door encyclopedia salesperson is...Ch. 4.5 - An underground military installation is fortified...Ch. 4.5 - Darryls statistics homework last night was to flip...Ch. 4.5 - When a machine is improperly adjusted, it has...Ch. 4.5 - For a negative binomial random variable whose pdf...Ch. 4.5 - Let the random variable X denote the number of...Ch. 4.5 - Calculate the mean, variance, and...Ch. 4.5 - Let X1,X2, and X3 be three independent negative...Ch. 4.5 - Differentiate the moment-generating function...Ch. 4.5 - Suppose that X1,X2,...,Xk are independent negative...Ch. 4.6 - An Arctic weather station has three electronic...Ch. 4.6 - A service contact on a new university computer...Ch. 4.6 - Suppose a set of measurements Y1,Y2,...,Y100 is...Ch. 4.6 - Demonstrate that plays the role of a scale...Ch. 4.6 - Show that a gamma pdf has the unique mode r1; that...Ch. 4.6 - Prove that (12)=. (Hint: Consider E(Z2)), where Z...Ch. 4.6 - Show that (72)=158.Ch. 4.6 - If the random variable Y has the gamma pdf with...Ch. 4.6 - Differentiate the gamma moment-generating function...Ch. 4.6 - Prob. 10Q
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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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