An Introduction to Mathematical Statistics and Its Applications (6th Edition)
6th Edition
ISBN: 9780134114217
Author: Richard J. Larsen, Morris L. Marx
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 4.6, Problem 8Q
If the random variable
(Hint: Use the fact that
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Business discuss
You have been hired as an intern to run analyses on the data and report the results back to Sarah; the five questions that Sarah needs you to address are given below.
Does there appear to be a positive or negative relationship between price and screen size? Use a scatter plot to examine the relationship.
Determine and interpret the correlation coefficient between the two variables. In your interpretation, discuss the direction of the relationship (positive, negative, or zero relationship). Also discuss the strength of the relationship.
Estimate the relationship between screen size and price using a simple linear regression model and interpret the estimated coefficients. (In your interpretation, tell the dollar amount by which price will change for each unit of increase in screen size).
Include the manufacturer dummy variable (Samsung=1, 0 otherwise) and estimate the relationship between screen size, price and manufacturer dummy as a multiple linear regression model.
Interpret the…
Does there appear to be a positive or negative relationship between price and screen size? Use a scatter plot to examine the relationship. How to take snapshots: if you use a MacBook, press Command+ Shift+4 to take snapshots. If you are using Windows, use the Snipping Tool to take snapshots.
Question 1: Determine and interpret the correlation coefficient between the two variables. In your interpretation, discuss the direction of the relationship (positive, negative, or zero relationship). Also discuss the strength of the relationship.
Value of correlation coefficient:
Direction of the relationship (positive, negative, or zero relationship):
Strength of the relationship (strong/moderate/weak):
Question 2: Estimate the relationship between screen size and price using a simple linear regression model and interpret the estimated coefficients. In your interpretation, tell the dollar amount by which price will change for each unit of increase in screen size. (The answer for the…
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
Knowledge Booster
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.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.)arrow_forwardProblem 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?arrow_forwardWe 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? 2arrow_forward
- Question 1. Your manager asks you to explain why the Black-Scholes model may be inappro- priate for pricing options in practice. Give one reason that would substantiate this claim? Question 2. We consider stock #1 and stock #2 in the model of Problem 2. Your manager asks you to pick only one of them to invest in based on the model provided. Which one do you choose and why ? Question 3. Let (St) to be an asset modeled by the Black-Scholes SDE. Let Ft be the price at time t of a European put with maturity T and strike price K. Then, the discounted option price process (ert Ft) t20 is a martingale. True or False? (Explain your answer.) Question 4. You are considering pricing an American put option using a Black-Scholes model for the underlying stock. An explicit formula for the price doesn't exist. In just a few words (no more than 2 sentences), explain how you would proceed to price it. Question 5. We model a short rate with a Ho-Lee model drt = ln(1+t) dt +2dWt. Then the interest rate…arrow_forwardIn 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.)arrow_forwardThe managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c. Question content area bottom Part 1 a. Develop a simple linear regression model between billable hours and overhead costs. Overhead Costsequals=212495.2212495.2plus+left parenthesis 42.4857 right parenthesis42.485742.4857times×Billable Hours (Round the constant to one decimal place as needed. Round the coefficient to four decimal places as needed. Do not include the $ symbol in your answers.) Part 2 b. Interpret the coefficients of your regression model. Specifically, what does the fixed component of the model mean to the consulting firm? Interpret the fixed term, b 0b0, if appropriate. Choose the correct answer below. A. The value of b 0b0 is the predicted billable hours for an overhead cost of 0 dollars. B. It is not appropriate to interpret b 0b0, because its value…arrow_forward
- Using the accompanying Home Market Value data and associated regression line, Market ValueMarket Valueequals=$28,416+$37.066×Square Feet, compute the errors associated with each observation using the formula e Subscript ieiequals=Upper Y Subscript iYiminus−ModifyingAbove Upper Y with caret Subscript iYi and construct a frequency distribution and histogram. LOADING... Click the icon to view the Home Market Value data. Question content area bottom Part 1 Construct a frequency distribution of the errors, e Subscript iei. (Type whole numbers.) Error Frequency minus−15 comma 00015,000less than< e Subscript iei less than or equals≤minus−10 comma 00010,000 0 minus−10 comma 00010,000less than< e Subscript iei less than or equals≤minus−50005000 5 minus−50005000less than< e Subscript iei less than or equals≤0 21 0less than< e Subscript iei less than or equals≤50005000 9…arrow_forwardThe managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c Overhead Costs Billable Hours345000 3000385000 4000410000 5000462000 6000530000 7000545000 8000arrow_forwardUsing the accompanying Home Market Value data and associated regression line, Market ValueMarket Valueequals=$28,416plus+$37.066×Square Feet, compute the errors associated with each observation using the formula e Subscript ieiequals=Upper Y Subscript iYiminus−ModifyingAbove Upper Y with caret Subscript iYi and construct a frequency distribution and histogram. Square Feet Market Value1813 911001916 1043001842 934001814 909001836 1020002030 1085001731 877001852 960001793 893001665 884001852 1009001619 967001690 876002370 1139002373 1131001666 875002122 1161001619 946001729 863001667 871001522 833001484 798001589 814001600 871001484 825001483 787001522 877001703 942001485 820001468 881001519 882001518 885001483 765001522 844001668 909001587 810001782 912001483 812001519 1007001522 872001684 966001581 86200arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Trigonometry (MindTap Course List)TrigonometryISBN:9781337278461Author:Ron LarsonPublisher:Cengage Learning
Algebra & Trigonometry with Analytic GeometryAlgebraISBN:9781133382119Author:SwokowskiPublisher:Cengage
Trigonometry (MindTap Course List)
Trigonometry
ISBN:9781337278461
Author:Ron Larson
Publisher:Cengage Learning
Algebra & Trigonometry with Analytic Geometry
Algebra
ISBN:9781133382119
Author:Swokowski
Publisher:Cengage
Mod-01 Lec-01 Discrete probability distributions (Part 1); Author: nptelhrd;https://www.youtube.com/watch?v=6x1pL9Yov1k;License: Standard YouTube License, CC-BY
Discrete Probability Distributions; Author: Learn Something;https://www.youtube.com/watch?v=m9U4UelWLFs;License: Standard YouTube License, CC-BY
Probability Distribution Functions (PMF, PDF, CDF); Author: zedstatistics;https://www.youtube.com/watch?v=YXLVjCKVP7U;License: Standard YouTube License, CC-BY
Discrete Distributions: Binomial, Poisson and Hypergeometric | Statistics for Data Science; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=lHhyy4JMigg;License: Standard Youtube License