Understandable Statistics: Concepts and Methods
12th Edition
ISBN: 9781337119917
Author: Charles Henry Brase, Corrinne Pellillo Brase
Publisher: Cengage Learning
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Chapter 6.5, Problem 2P
To determine
Mention what is the standard deviation of a sampling distribution.
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solving problem 1
select bmw stock. you can assume the price of the stock
This problem is based on the fundamental option pricing formula for the continuous-time
model developed in class, namely the value at time 0 of an option with maturity T and
payoff F is given by:
We consider the two options below:
Fo=
-rT
= e
Eq[F].
1
A. An option with which you must buy a share of stock at expiration T = 1 for strike
price K = So.
B. An option with which you must buy a share of stock at expiration T = 1 for strike
price K given by
T
K =
T
St dt.
(Note that both options can have negative payoffs.) We use the continuous-time Black-
Scholes model to price these options. Assume that the interest rate on the money market
is r.
(a) Using the fundamental option pricing formula, find the price of option A. (Hint:
use the martingale properties developed in the lectures for the stock price process
in order to calculate the expectations.)
(b) Using the fundamental option pricing formula, find the price of option B.
(c) Assuming the interest rate is very small (r ~0), use Taylor…
Chapter 6 Solutions
Understandable Statistics: Concepts and Methods
Ch. 6.1 - Statistical Literacy Which, if any, of the curves...Ch. 6.1 - Statistical Literacy Look at the normal curve in...Ch. 6.1 - Prob. 3PCh. 6.1 - Critical Thinking Sketch a normal curve (a) with...Ch. 6.1 - Basic Computation: Empirical Rule What percentage...Ch. 6.1 - Basic Computation: Empirical Rule What percentage...Ch. 6.1 - Distribution: Heights of Coeds Assuming that the...Ch. 6.1 - Distribution: Rhode Island Red Chicks The...Ch. 6.1 - Archaeology: Tree Rings At Burnt Mesa Pueblo,...Ch. 6.1 - Vending Machine: Soft Drinks A vending machine...
Ch. 6.1 - Pain Management: Laser Therapy Effect of...Ch. 6.1 - Control Charts: Yellowstone National Park...Ch. 6.1 - Control Charts: Bank Loans Tri-County Bank is a...Ch. 6.1 - Control Charts: Motel Rooms The manager of Motel...Ch. 6.1 - Prob. 15PCh. 6.1 - Prob. 16PCh. 6.1 - Uniform Distribution: Measurement Errors...Ch. 6.1 - Prob. 18PCh. 6.1 - Prob. 19PCh. 6.1 - Prob. 20PCh. 6.2 - Statistical Literacy What does a standard score...Ch. 6.2 - Statistical Literacy Does a raw score less than...Ch. 6.2 - Prob. 3PCh. 6.2 - Prob. 4PCh. 6.2 - Basic Computation: z Score and Raw Score A normal...Ch. 6.2 - Basic Computation: z Score and Raw Score A normal...Ch. 6.2 - Prob. 7PCh. 6.2 - Prob. 8PCh. 6.2 - z Scores: First Aid Course The college physical...Ch. 6.2 - Prob. 10PCh. 6.2 - Prob. 11PCh. 6.2 - Normal Curve: Tree Rings Tree-ring dates were used...Ch. 6.2 - Basic Computation: Finding Areas Under the...Ch. 6.2 - Prob. 14PCh. 6.2 - Basic Computation: Finding Areas Under the...Ch. 6.2 - Prob. 16PCh. 6.2 - Prob. 17PCh. 6.2 - Prob. 18PCh. 6.2 - Prob. 19PCh. 6.2 - Basic Computation: Finding Areas Under the...Ch. 6.2 - Prob. 21PCh. 6.2 - Prob. 22PCh. 6.2 - Prob. 23PCh. 6.2 - Prob. 24PCh. 6.2 - Prob. 25PCh. 6.2 - Prob. 26PCh. 6.2 - Prob. 27PCh. 6.2 - Prob. 28PCh. 6.2 - Prob. 29PCh. 6.2 - Basic Computation: Finding Areas Under the...Ch. 6.2 - Prob. 31PCh. 6.2 - Prob. 32PCh. 6.2 - Basic Computation: Finding Probabilities In...Ch. 6.2 - Prob. 34PCh. 6.2 - Prob. 35PCh. 6.2 - Prob. 36PCh. 6.2 - Prob. 37PCh. 6.2 - Basic Computation: Finding Probabilities In...Ch. 6.2 - Prob. 39PCh. 6.2 - Prob. 40PCh. 6.2 - Prob. 41PCh. 6.2 - Prob. 42PCh. 6.2 - Basic Computation: Finding Probabilities In...Ch. 6.2 - Prob. 44PCh. 6.2 - Basic Computation: Finding Probabilities In...Ch. 6.2 - Prob. 46PCh. 6.2 - Prob. 47PCh. 6.2 - Basic Computation: Finding Probabilities In...Ch. 6.2 - Prob. 49PCh. 6.2 - Prob. 50PCh. 6.3 - Statistical Literacy Consider a normal...Ch. 6.3 - Statistical Literacy Suppose 5% of the area under...Ch. 6.3 - Prob. 3PCh. 6.3 - Critical Thinking: Normality Consider the...Ch. 6.3 - Basic Computation: Find Probabilities In Problems...Ch. 6.3 - Basic Computation: Find Probabilities In Problems...Ch. 6.3 - Basic Computation: Find Probabilities In Problems...Ch. 6.3 - Basic Computation: Find Probabilities In Problems...Ch. 6.3 - Basic Computation: Find Probabilities In Problems...Ch. 6.3 - Basic Computation: Find Probabilities In Problems...Ch. 6.3 - Basic Computation: Find Probabilities In Problems...Ch. 6.3 - Basic Computation: Find Probabilities In Problems...Ch. 6.3 - Basic Computation: Find Probabilities In Problems...Ch. 6.3 - Basic Computation: Find Probabilities In Problems...Ch. 6.3 - Basic Computation: Find z Values In Problems 1524,...Ch. 6.3 - Basic Computation: Find z Values In Problems 1524,...Ch. 6.3 - Basic Computation: Find z Values In Problems 1524,...Ch. 6.3 - Basic Computation: Find z Values In Problems 1524,...Ch. 6.3 - Basic Computation: Find z Values In Problems 1524,...Ch. 6.3 - Prob. 20PCh. 6.3 - Prob. 21PCh. 6.3 - Basic Computation: Find z Values In Problems 1524,...Ch. 6.3 - Prob. 23PCh. 6.3 - Prob. 24PCh. 6.3 - Prob. 25PCh. 6.3 - Prob. 26PCh. 6.3 - Archaeology: Hopi Village Thickness measurements...Ch. 6.3 - Law Enforcement: Police Response Time Police...Ch. 6.3 - Prob. 29PCh. 6.3 - Guarantee: Watches Accrotime is a manufacturer of...Ch. 6.3 - Expand Your Knowledge: Estimating the Standard...Ch. 6.3 - Estimating the Standard Deviation: Refrigerator...Ch. 6.3 - Prob. 33PCh. 6.3 - Prob. 34PCh. 6.3 - Insurance: Satellites A relay microchip in a...Ch. 6.3 - Convertion Center: Exhibition Show Attendance...Ch. 6.3 - Exhibition Shows: Inverse Normal Distribution Most...Ch. 6.3 - Budget: Maintenance The amount of money spent...Ch. 6.3 - Prob. 39PCh. 6.3 - Prob. 40PCh. 6.4 - Prob. 1PCh. 6.4 - Prob. 2PCh. 6.4 - Prob. 3PCh. 6.4 - Prob. 4PCh. 6.4 - Prob. 5PCh. 6.4 - Prob. 6PCh. 6.4 - Prob. 7PCh. 6.4 - Prob. 8PCh. 6.4 - Prob. 9PCh. 6.5 - Statistical Literacy What is the standard error of...Ch. 6.5 - Prob. 2PCh. 6.5 - Prob. 3PCh. 6.5 - Prob. 4PCh. 6.5 - Basic Computation: Central Limit Theorem Suppose x...Ch. 6.5 - Basic Computation: Central Limit Theorem Suppose x...Ch. 6.5 - Prob. 7PCh. 6.5 - Prob. 8PCh. 6.5 - Prob. 9PCh. 6.5 - Prob. 10PCh. 6.5 - Prob. 11PCh. 6.5 - Critical Thinking Suppose an x distribution has...Ch. 6.5 - Prob. 13PCh. 6.5 - Vital Statistics: Heights of Men The heights of...Ch. 6.5 - Prob. 15PCh. 6.5 - Medical: White Blood Cells Let x be a random...Ch. 6.5 - Wildlife: Deer Let x be a random variable that...Ch. 6.5 - Focus Problem: Impulse Buying Let x represent the...Ch. 6.5 - Finance: Templeton Funds Templeton World is a...Ch. 6.5 - Finance: European Growth Fund A European growth...Ch. 6.5 - Expand Your Knowledge: Totals Instead of Averages...Ch. 6.5 - Prob. 22PCh. 6.5 - Prob. 23PCh. 6.6 - Prob. 1PCh. 6.6 - Prob. 2PCh. 6.6 - Basic Computation: Normal Approximation to a...Ch. 6.6 - Basic Computation: Normal Approximation to a...Ch. 6.6 - Critical Thinking You need to compute the...Ch. 6.6 - Critical Thinking Consider a binomial experiment...Ch. 6.6 - In the following problems, check that it is...Ch. 6.6 - In the following problems, check that it is...Ch. 6.6 - Prob. 9PCh. 6.6 - Prob. 10PCh. 6.6 - Prob. 11PCh. 6.6 - Prob. 12PCh. 6.6 - Prob. 13PCh. 6.6 - In the following problems, check that it is...Ch. 6.6 - Prob. 15PCh. 6.6 - Prob. 17PCh. 6.6 - Prob. 18PCh. 6.6 - Prob. 19PCh. 6.6 - Basic Computation: p Distribution Suppose we have...Ch. 6.6 - Prob. 21PCh. 6 - Prob. 1CRPCh. 6 - Prob. 2CRPCh. 6 - Statistical Literacy Is a process in control if...Ch. 6 - Prob. 4CRPCh. 6 - Prob. 5CRPCh. 6 - Prob. 6CRPCh. 6 - Prob. 7CRPCh. 6 - Prob. 8CRPCh. 6 - Prob. 9CRPCh. 6 - Prob. 10CRPCh. 6 - Prob. 11CRPCh. 6 - Basic Computation: Probability Given that x is a...Ch. 6 - Prob. 13CRPCh. 6 - Prob. 14CRPCh. 6 - Prob. 15CRPCh. 6 - Prob. 16CRPCh. 6 - Prob. 17CRPCh. 6 - Prob. 18CRPCh. 6 - Prob. 19CRPCh. 6 - Prob. 20CRPCh. 6 - Prob. 21CRPCh. 6 - Prob. 22CRPCh. 6 - Prob. 23CRPCh. 6 - Prob. 24CRPCh. 6 - Prob. 25CRPCh. 6 - Prob. 26CRPCh. 6 - Break into small groups and discuss the following...Ch. 6 - Prob. 1LCCh. 6 - Prob. 2LCCh. 6 - Prob. 3LCCh. 6 - Prob. 4LCCh. 6 - Discuss each of the following topics in class or...Ch. 6 - Prob. 1UTCh. 6 - Prob. 1CURPCh. 6 - Prob. 2CURPCh. 6 - Prob. 3CURPCh. 6 - Prob. 4CURPCh. 6 - Prob. 5CURPCh. 6 - Prob. 6CURPCh. 6 - Prob. 7CURPCh. 6 - Prob. 8CURPCh. 6 - Prob. 9CURPCh. 6 - Prob. 10CURPCh. 6 - Prob. 11CURPCh. 6 - Prob. 12CURPCh. 6 - Prob. 13CURPCh. 6 - Prob. 14CURPCh. 6 - Prob. 15CURP
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