Statistics for Business and Economics (13th Edition)

13th Edition

ISBN: 9780134506593

Author: James T. McClave, P. George Benson, Terry Sincich

Publisher: PEARSON

See similar textbooks

Concept explainers

Estimation

A new framework of data analysis where the new statistical methods are used for interpreting the results and analyzing the data is known as estimation in statistics.

Videos

Textbook Question

Chapter 4.3, Problem 4.44LM

If x is a binomial random variable, use Table I in Appendix D to find the following probabilities:

a. P (x = 2) for n = 10, p = .4
b. P (x ≤ 5) for n = 15, p = .6
c. P(x > 1) for n = 5, p = .1
d. P (x < 10) for n = 25,p = .7
e. P (x ≥ 10) for n = 15, p = .9
f. P (x = 2) for n = 20, p = .2

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 4.3, Problem 4.43LM

Chapter 4.3, Problem 4.45LM

Students have asked these similar questions

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?

We consider a 4-dimensional stock price model given (under P) by dẴ₁ = µ· Xt dt + йt · ΣdŴt where (W) is an n-dimensional Brownian motion, π = (0.02, 0.01, -0.02, 0.05), 0.2 0 0 0 0.3 0.4 0 0 Σ= -0.1 -4a За 0 0.2 0.4 -0.1 0.2) and a E R. We assume that ☑0 = (1, 1, 1, 1) and that the interest rate on the market is r = 0.02. (a) Give a condition on a that would make stock #3 be the one with largest volatility. (b) Find the diversification coefficient for this portfolio as a function of a. (c) Determine the maximum diversification coefficient d that you could reach by varying the value of a? 2

Chapter 4 Solutions

Statistics for Business and Economics (13th Edition)

Ch. 4.1 - Types of random variables. Which of the following...Ch. 4.1 - Types of finance random variables. Security...Ch. 4.1 - NHTSA crash tests. Refer to the National Highway...Ch. 4.1 - Customers in line at a Subway shop. The number of...Ch. 4.1 - Executive pay. Refer to Glassdoor Economic...Ch. 4.1 - Banking. Give an example of a discrete random...Ch. 4.1 - Economics. Give an example of a continuous random...Ch. 4.1 - Hotel management. Give an example of a discrete...Ch. 4.1 - Retailing. Give two examples of discrete random...Ch. 4.1 - Stock market. Give an example of a continuous...

Knowledge Booster

$Statistics$

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, statistics and related others by exploring similar questions and additional content below.

If x is a binomial random variable, use Table I in Appendix D to find the following probabilities: a. P ( x = 2) for n = 10, p = .4 b. P ( x ≤ 5) for n = 15, p = .6 c. P ( x > 1) for n = 5 , p = .1 d. P ( x < 10) for n = 25,p = .7 e. P (x ≥ 10) for n = 15, p = .9 f. P ( x = 2) for n = 20, p = .2

Solution Summary: The author explains that the required probability is P(X=2)=underset_0.121.

Concept explainers

Videos

Want to see the full answer?

Chapter 4 Solutions