HEART OF MATHEMATICS
4th Edition
ISBN: 9781119760061
Author: Burger
Publisher: WILEY
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Chapter 5.2, Problem 18MS
Thickened Möbius. Imagine a Möbius band thickened so the edge is as thick as the side. We’ll call this a thickened Möbius band. Flow many edges does it have? Twist one end
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3. A market consists of two risky assets with rates of return R₁ and R2 and no risk-free
asset. From market data the following have been estimated: ER₁ = 0.25, ER2 = 0.05,
Var R₁ = 0.01, Var R2 = 0.04 and the correlation between R1 and R2 is p = -0.75.
(i) Given that an investor is targeting a total expected return of μ = 0.2. What
portfolio weights should they choose to meet this goal with minimum portfolio
variance? Correct all your calculations up to 4 decimal points.
(ii) Determine the global minimum-variance portfolio and the expected return and
variance of return of this portfolio (4 d.p.).
(iii) Sketch the minimum-variance frontier in the μ-σ² plane and indicate the efficient
frontier.
(iv) Without further calculation, explain how the minimum variance of the investor's
portfolio return will change if the two risky assets were independent.
2. A landlord is about to write a rental contract for a tenant which lasts T months. The
landlord first decides the length T > 0 (need not be an integer) of the contract, the
tenant then signs it and pays an initial handling fee of £100 before moving in. The
landlord collects the total amount of rent erT at the end of the contract at a continuously
compounded rate r> 0, but the contract stipulates that the tenant may leave before T,
in which case the landlord only collects the total rent up until the tenant's departure
time 7. Assume that 7 is exponentially distributed with rate > 0, λ‡r.
(i) Calculate the expected total payment EW the landlord will receive in terms of T.
(ii) Assume that the landlord has logarithmic utility U(w) = log(w - 100) and decides
that the rental rate r should depend on the contract length T by
r(T)
=
λ
√T
1
For each given λ, what T (as a function of X) should the landlord choose so as to
maximise their expected utility? Justify your answer.
Hint. It might be…
Please solving problem2
Problem1
We consider a two-period binomial model with the following properties: each period lastsone (1) year and the current stock price is S0 = 4. On each period, the stock price doubleswhen it moves up and is reduced by half when it moves down. The annual interest rateon the money market is 25%. (This model is the same as in Prob. 1 of HW#2).We consider four options on this market: A European call option with maturity T = 2 years and strike price K = 5; A European put option with maturity T = 2 years and strike price K = 5; An American call option with maturity T = 2 years and strike price K = 5; An American put option with maturity T = 2 years and strike price K = 5.(a) Find the price at time 0 of both European options.(b) Find the price at time 0 of both American options. Compare your results with (a)and comment.(c) For each of the American options, describe the optimal exercising strategy.
Chapter 5 Solutions
HEART OF MATHEMATICS
Ch. 5.1 - Describing distortion. What does it mean to say...Ch. 5.1 - Your last sheet. Youre in your bathroom reading...Ch. 5.1 - Rubber polygons. Find a large rubber band and...Ch. 5.1 - Out, out red spot. Remove the red spot from the...Ch. 5.1 - That theta (S). Does there exist a pair of points...Ch. 5.1 - Your ABCs (H). Consider the following letters made...Ch. 5.1 - Half dollar and a straw. Suppose we drill a hole...Ch. 5.1 - Drop them. Is it possible to take off your...Ch. 5.1 - Coffee and doughnuts (H). Is a standard coffee mug...Ch. 5.1 - Lasting ties. Tie a thin rope around a friends...
Ch. 5.1 - Will you spill? (S). Suppose you rest a glass of...Ch. 5.1 - Grabbing the brass ring. Suppose a string attached...Ch. 5.1 - Hair care. Is a regular comb equivalent by...Ch. 5.1 - Three two-folds. Take three pieces of paper and...Ch. 5.1 - Equivalent objects. Group the objects in this...Ch. 5.1 - Clips. Is a paper clip equivalent to a circle? If...Ch. 5.1 - Pennies plus. Consider the two objects pictured...Ch. 5.1 - Starry-eyed. Consider the two stars below. Are...Ch. 5.1 - Learning the ropes. Pictured below are two ropes,...Ch. 5.1 - HoIy spheres. Consider the two spheres shown. Each...Ch. 5.1 - From sphere to torus. The following sequence of...Ch. 5.1 - Half full, half empty. One glass is half filled...Ch. 5.1 - Male versus female. Consider the male and female...Ch. 5.1 - Holey tori. Are these two objects equivalent by...Ch. 5.1 - More holey tori (H). Are these two objects...Ch. 5.1 - Last holey tori. Are these two objects equivalent...Ch. 5.1 - Beyond the holey inner tube. Suppose you are given...Ch. 5.1 - Heavy metal. Carefully examine this picture of a...Ch. 5.1 - The disk and the inner tube (ExH). Suppose you...Ch. 5.1 - Building a torus (S). Suppose you are given a...Ch. 5.1 - Lasso that hole. Consider the first two tori on...Ch. 5.1 - Knots in dougtnuts. We are given two solid...Ch. 5.1 - From knots to glasses (ExH). Take the thickened...Ch. 5.1 - More Jell-O. Suppose we take a cube of Jell-O,...Ch. 5.1 - Fixed spheres (H). We are given two spheres made...Ch. 5.1 - Holes. Is a torus equivalent to a two-holed torus?...Ch. 5.1 - More holes. Is a two-holed torus equivalent to a...Ch. 5.1 - Here we celebrate the power of algebra as a...Ch. 5.1 - Here we celebrate the power of algebra as a...Ch. 5.1 - Here we celebrate the power of algebra as a...Ch. 5.1 - Here we celebrate the power of algebra as a...Ch. 5.1 - Here we celebrate the power of algebra as a...Ch. 5.2 - One side to every story. What is a Mobius band?Ch. 5.2 - Maybe Mobius. How can you look at a loop of paper...Ch. 5.2 - Singin the blues. Take an ordinary strip of white...Ch. 5.2 - Whos blue now? Take an ordinary strip of white...Ch. 5.2 - Twisted sister. Your sister holds a strip of...Ch. 5.2 - Two twists. Take a strip of paper, put two half...Ch. 5.2 - Two twists again. Take a strip of paper, put two...Ch. 5.2 - Three twists (H). Take a strip of paper, put three...Ch. 5.2 - Prob. 11MSCh. 5.2 - Möbius lengths. Use the edge identification...Ch. 5.2 - Squash and cut. Take a Möbius band and squash it...Ch. 5.2 - Two at once. Take two strips of paper and put them...Ch. 5.2 - Parallel Möbius. Is it possible to have two...Ch. 5.2 - Puzzling. Suppose you have a collection of jigsaw...Ch. 5.2 - Möbius triangle. Make a 1-inch-wide Möbius band,...Ch. 5.2 - Thickened Möbius. Imagine a Möbius band...Ch. 5.2 - Thickened faces. How many faces (sides) does a...Ch. 5.2 - Thick then thin. Suppose we take a Môbius band,...Ch. 5.2 - Drawing the band (ExH). Imagine you have a Möbius...Ch. 5.2 - Tubing (H). Suppose we take two Möbius bands and...Ch. 5.2 - Bug out (ExH). Suppose you are a ladybug on the...Ch. 5.2 - Open cider. Consider the Klein bottle half filled...Ch. 5.2 - Rubber Klein (S). Suppose you have a rectangular...Ch. 5.2 - One edge. Using the method on page 347 for...Ch. 5.2 - Twist of fate (S). Using the edge-identification...Ch. 5.2 - Linked together. Using the edge-identification...Ch. 5.2 - Count twists. Using the edge-identification...Ch. 5.2 - Dont cross. Can you draw a curve that does not...Ch. 5.2 - Twisted up (H). Suppose you are given a band of...Ch. 5.2 - Prob. 32MSCh. 5.2 - Find a band. Find a Möbius band on the surface of...Ch. 5.2 - Holy Klein. Show that the figure on the left is...Ch. 5.2 - Möbius Möbius. Show that the Klein bottle is two...Ch. 5.2 - Attaching tubes. Consider a Möbius band with two...Ch. 5.2 - Möbius map (H). Using felt-tip color pens that...Ch. 5.2 - Thick slices. Thicken a Môbius band and then...Ch. 5.2 - Bagel slices. If we take a bagel and slice it in...Ch. 5.2 - Gluing and cutting. Consider a rectangular sheet...Ch. 5.2 - Here we celebrate the power of algebra as a...Ch. 5.2 - Here we celebrate the power of algebra as a...Ch. 5.2 - Here we celebrate the power of algebra as a...Ch. 5.2 - Here we celebrate the power of algebra as a...Ch. 5.2 - Here we celebrate the power of algebra as a...Ch. 5.3 - Knotty start. Which of the followign knots are...Ch. 5.3 - The not knot. What is the unknot?Ch. 5.3 - Crossing count. Count the crossings in each knot...Ch. 5.3 - Tangled up. Is the figure below a knot or a link?Ch. 5.3 - Ringing endorsement. What are the Borromean rings?Ch. 5.3 - Human trefoil. What is the minimum number of...Ch. 5.3 - Human figure eight. What is the minimum number of...Ch. 5.3 - Stick number (ExH). What is the smallest number...Ch. 5.3 - More Möbius. Make a Möbius band with three half...Ch. 5.3 - Slinky (H). Take a Slinky, lengthen one of its...Ch. 5.3 - More slink. Take a Slinky, and this time weave an...Ch. 5.3 - Make it. Use a piece of string or an extenstion...Ch. 5.3 - Knotted (S). Take an unknotted loop. Tie a knot in...Ch. 5.3 - Slip. Take an unknotted loop and put a slip knot...Ch. 5.3 - Dollar link. Take two paper clips and a dollar and...Ch. 5.3 - Prob. 18MSCh. 5.3 - Unknotting knots (H). In each of the two knots at...Ch. 5.3 - Alternating. A picture of a knot is alternating...Ch. 5.3 - Making it alternating. Consider the knot on the...Ch. 5.3 - Prob. 22MSCh. 5.3 - One cross (H). Prove that any loop with exactly...Ch. 5.3 - Two loops (S). Is there a picture of two linked...Ch. 5.3 - Hold the phone. Disconnect the wire from the phone...Ch. 5.3 - More unknotting knots. In these two knots, find...Ch. 5.3 - Unknotting pictures (S). Suppose you are given a...Ch. 5.3 - Twisted. Suppose we are given a figure consisting...Ch. 5.3 - More alternating. First reread Mindscape 20. For...Ch. 5.3 - Crossing numbers. Suppose you are given pictures...Ch. 5.3 - Lots of crossings. Suppose you arc given a picture...Ch. 5.3 - Torus knots (H). Can you draw a trefoil knot on a...Ch. 5.3 - Two crosses. Prove that any loop with exactly two...Ch. 5.3 - Hoop it up. Show that every knot can be positioned...Ch. 5.3 - The switcheroo. Pictured below is a way of...Ch. 5.3 - 4D washout. Why is the study of knots and links...Ch. 5.3 - Brunnian links (H). Link four loops together in...Ch. 5.3 - Fire drill (ExH). A fire starts in your...Ch. 5.3 - Fixed spheres again. We are given two spheres that...Ch. 5.3 - Here we celebrate the power of algebra as a...Ch. 5.3 - Here we celebrate the power of algebra as a...Ch. 5.3 - Here we celebrate the power of algebra as a...Ch. 5.3 - Here we celebrate the power of algebra as a...Ch. 5.3 - Here we celebrate the power of algebra as a...Ch. 5.4 - Fixed things first. What does the Brouwer Fixed...Ch. 5.4 - Say cheese. Youre making an open-faced cheese...Ch. 5.4 - Fixed flapjacks. Youre making pancakes and...Ch. 5.4 - Prob. 4MSCh. 5.4 - Loop around. What does the Hot Loop Theorem...Ch. 5.4 - Fixed on a square. Does the Brouwer Fixed Point...Ch. 5.4 - Fixed on a circle. Does the Brouwer Fixed Point...Ch. 5.4 - Winding arrows. In each drawing below we have a...Ch. 5.4 - Prob. 10MSCh. 5.4 - Prob. 11MSCh. 5.4 - Home heating (H). Prove that there are two points...Ch. 5.4 - Prob. 13MSCh. 5.4 - Prob. 14MSCh. 5.4 - Prob. 15MSCh. 5.4 - Lining up (H). Suppose we have two line segments...Ch. 5.4 - A nice temp. Must there be two antipodal points on...Ch. 5.4 - Prob. 18MSCh. 5.4 - Diet drill. Suppose someone weighs 160 lbs. and...Ch. 5.4 - Speedy (S). You enter a tollway and are given a...Ch. 5.4 - The cut core. Suppose we have the red and blue...Ch. 5.4 - Fixed without boundary. Do you think that the...Ch. 5.4 - Take a hike (ExH). A hiker decides to climb up...Ch. 5.4 - Here we celebrate the power of algebra as a...Ch. 5.4 - Here we celebrate the power of algebra as a...Ch. 5.4 - Here we celebrate the power of algebra as a...Ch. 5.4 - Here we celebrate the power of algebra as a...Ch. 5.4 - Here we celebrate the power of algebra as a...
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