Essentials of Statistics, Books a la Carte Edition (5th Edition)
5th Edition
ISBN: 9780321926739
Author: Mario F. Triola
Publisher: PEARSON
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Chapter 6.7, Problem 19BSC
To determine
To obtain: The
To suggest: The result.
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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
Essentials of Statistics, Books a la Carte Edition (5th Edition)
Ch. 6.2 - Normal Distribution When we refer to a normal...Ch. 6.2 - Normal Distribution A normal distribution is...Ch. 6.2 - Standard Normal Distribution Identify the...Ch. 6.2 - Notation What does the notation Z indicate?Ch. 6.2 - Continuous Uniform Distribution. In Exercises 58,...Ch. 6.2 - Continuous Uniform Distribution. In Exercises 58,...Ch. 6.2 - Continuous Uniform Distribution. In Exercises 58,...Ch. 6.2 - Continuous Uniform Distribution. In Exercises 58,...Ch. 6.2 - Prob. 9BSCCh. 6.2 - Standard Normal Distribution. In Exercises 912,...
Ch. 6.2 - Prob. 11BSCCh. 6.2 - Prob. 12BSCCh. 6.2 - Prob. 13BSCCh. 6.2 - Prob. 14BSCCh. 6.2 - Prob. 15BSCCh. 6.2 - Prob. 16BSCCh. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Prob. 26BSCCh. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Prob. 28BSCCh. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 1736,...Ch. 6.2 - Standard Normal Distribution. In Exercises 17-36,...Ch. 6.2 - Standard Normal Distribution. In Exercises 17-36,...Ch. 6.2 - Prob. 35BSCCh. 6.2 - Prob. 36BSCCh. 6.2 - Finding Bone Density Scores. In Exercises 37-40...Ch. 6.2 - Finding Bone Density Scores. In Exercises 37-40...Ch. 6.2 - Prob. 39BSCCh. 6.2 - Finding Bone Density Scores. In Exercises 37-40...Ch. 6.2 - Finding Critical Values. In Exercises 41-44, find...Ch. 6.2 - Prob. 42BSCCh. 6.2 - Prob. 43BSCCh. 6.2 - Prob. 44BSCCh. 6.2 - Prob. 45BSCCh. 6.2 - Prob. 46BSCCh. 6.2 - Prob. 47BSCCh. 6.2 - Prob. 48BSCCh. 6.2 - Prob. 49BBCh. 6.2 - Distributions In a continuous uniform...Ch. 6.3 - Pulse Rates Pulse rates of women are normally...Ch. 6.3 - IQ Scores The Wechsler Adult Intelligence Scale is...Ch. 6.3 - Prob. 3BSCCh. 6.3 - Random Digits Computers are commonly used to...Ch. 6.3 - IQ Scores. In Exercises 5-8, find the area of the...Ch. 6.3 - Prob. 6BSCCh. 6.3 - Prob. 7BSCCh. 6.3 - Prob. 8BSCCh. 6.3 - Prob. 9BSCCh. 6.3 - Prob. 10BSCCh. 6.3 - Prob. 11BSCCh. 6.3 - Prob. 12BSCCh. 6.3 - IQ Scores. In Exercises 13-20, assume that adults...Ch. 6.3 - IQ Scores. In Exercises 13-20, assume that adults...Ch. 6.3 - IQ Scores. In Exercises 13-20, assume that adults...Ch. 6.3 - IQ Scores. In Exercises 13-20, assume that adults...Ch. 6.3 - IQ Scores. In Exercises 13-20, assume that adults...Ch. 6.3 - IQ Scores. In Exercises 13-20, assume that adults...Ch. 6.3 - IQ Scores. In Exercises 13-20, assume that adults...Ch. 6.3 - IQ Scores. In Exercises 13-20, assume that adults...Ch. 6.3 - In Exercises 21-24, use these parameters (based on...Ch. 6.3 - In Exercises 21-24, use these parameters (based on...Ch. 6.3 - Prob. 23BSCCh. 6.3 - In Exercises 21-24, use these parameters (based on...Ch. 6.3 - Water Taxi Safety When a water taxi sank in...Ch. 6.3 - Prob. 26BSCCh. 6.3 - Prob. 27BSCCh. 6.3 - Prob. 28BSCCh. 6.3 - Prob. 29BSCCh. 6.3 - Aircraft Seat Width Engineers want to design seats...Ch. 6.3 - Chocolate Chip Cookies The Chapter Problem for...Ch. 6.3 - Quarters After 1964, quarters were manufactured so...Ch. 6.3 - Large Data Sets. In Exercises 33 and 34, refer to...Ch. 6.3 - Prob. 34BSCCh. 6.3 - Curving Test Scores A statistics professor gives a...Ch. 6.3 - Using Continuity Correction There are many...Ch. 6.3 - Prob. 37BBCh. 6.3 - SAT and ACT Tests Based on recent results, scores...Ch. 6.4 - Minting Quarters In a recent year, the U.S. Mint...Ch. 6.4 - Sampling with Replacement In a recent year, the...Ch. 6.4 - Unbiased Estimators Data Set 1 in Appendix B...Ch. 6.4 - Prob. 4BSCCh. 6.4 - Prob. 5BSCCh. 6.4 - Prob. 6BSCCh. 6.4 - Prob. 7BSCCh. 6.4 - In Exercises 710, use the same population of {4,...Ch. 6.4 - In Exercises 710, use the same population of {4,...Ch. 6.4 - Prob. 10BSCCh. 6.4 - In Exercises 1114, use the population of ages {56,...Ch. 6.4 - In Exercises 1114, use the population of ages {56,...Ch. 6.4 - In Exercises 1114, use the population of ages {56,...Ch. 6.4 - Prob. 14BSCCh. 6.4 - Births: Sampling Distribution of Sample Proportion...Ch. 6.4 - Births: Sampling Distribution of Sample Proportion...Ch. 6.4 - SAT and ACT Tests Because they enable efficient...Ch. 6.4 - Quality Control After constructing a new...Ch. 6.4 - Prob. 19BBCh. 6.4 - Prob. 20BBCh. 6.5 - Standard Error of the Mean The population of...Ch. 6.5 - Small Sample Heights of adult females are normally...Ch. 6.5 - Notation The population of distances that adult...Ch. 6.5 - Prob. 4BSCCh. 6.5 - Using the Central Limit Theorem. In Exercises 510,...Ch. 6.5 - Using the Central Limit Theorem. In Exercises 510,...Ch. 6.5 - Using the Central Limit Theorem. In Exercises 510,...Ch. 6.5 - Using the Central Limit Theorem. In Exercises 510,...Ch. 6.5 - Using the Central Limit Theorem. In Exercises 510,...Ch. 6.5 - Using the Central Limit Theorem. In Exercises 510,...Ch. 6.5 - Prob. 11BSCCh. 6.5 - Prob. 12BSCCh. 6.5 - Designing Hats Women have head circumferences that...Ch. 6.5 - Designing Manholes According to the website...Ch. 6.5 - Prob. 15BSCCh. 6.5 - Loading MM Packages MM plain candies have a mean...Ch. 6.5 - Prob. 17BSCCh. 6.5 - Pulse Rates of Women Women have pulse rates that...Ch. 6.5 - Redesign of Ejection Seats When women were allowed...Ch. 6.5 - Loading a Tour Boat The Ethan Allen tour boat...Ch. 6.5 - Doorway Height The Boeing 757-200 ER airliner...Ch. 6.5 - Loading Aircraft Before every flight, the pilot...Ch. 6.5 - Prob. 23BBCh. 6.5 - Population Parameters Use the same population of...Ch. 6.6 - Normal Quantile Plot Data Set 1 in Appendix B...Ch. 6.6 - Prob. 2BSCCh. 6.6 - Prob. 3BSCCh. 6.6 - Prob. 4BSCCh. 6.6 - Prob. 5BSCCh. 6.6 - Interpreting Normal Quantile Plots. In Exercises...Ch. 6.6 - Prob. 7BSCCh. 6.6 - Interpreting Normal Quantile Plots. In Exercises...Ch. 6.6 - Prob. 9BSCCh. 6.6 - Determining Normality. In Exercises 912, refer to...Ch. 6.6 - Determining Normality. In Exercises 912, refer to...Ch. 6.6 - Prob. 12BSCCh. 6.6 - Prob. 13BSCCh. 6.6 - Prob. 14BSCCh. 6.6 - Using Technology to Generate Normal Quantile...Ch. 6.6 - Prob. 16BSCCh. 6.6 - Prob. 17BSCCh. 6.6 - Constructing Normal Quantile Plots. In Exercises...Ch. 6.6 - Prob. 19BSCCh. 6.6 - Prob. 20BSCCh. 6.6 - Transformations The heights (in inches) of men...Ch. 6.6 - Earthquake Magnitudes Richter scale earthquake...Ch. 6.6 - Prob. 23BBCh. 6.7 - Exact Value and Approximation Refer to Figure 6-21...Ch. 6.7 - Continuity Correction In a preliminary test of the...Ch. 6.7 - Prob. 3BSCCh. 6.7 - Prob. 4BSCCh. 6.7 - Prob. 5BSCCh. 6.7 - Prob. 6BSCCh. 6.7 - Prob. 7BSCCh. 6.7 - Prob. 8BSCCh. 6.7 - Prob. 9BSCCh. 6.7 - Prob. 10BSCCh. 6.7 - Voters. In Exercises 912, use a normal...Ch. 6.7 - Prob. 12BSCCh. 6.7 - Prob. 13BSCCh. 6.7 - Prob. 14BSCCh. 6.7 - Mendelian Genetics When Mendel conducted his...Ch. 6.7 - Prob. 16BSCCh. 6.7 - XSORT Gender Selection MicroSorts XSORT...Ch. 6.7 - Prob. 18BSCCh. 6.7 - Prob. 19BSCCh. 6.7 - Cell Phones and Brain Cancer In a study of 420,095...Ch. 6.7 - Prob. 21BSCCh. 6.7 - Prob. 22BSCCh. 6.7 - Prob. 23BSCCh. 6.7 - Prob. 24BSCCh. 6.7 - Decision Theory Marc Taylor plans to place 200...Ch. 6.7 - Prob. 26BBCh. 6 - Identify the values of and for the standard...Ch. 6 - Bone Density Test. In Exercises 1-4, assume that...Ch. 6 - Prob. 3CQQCh. 6 - Prob. 4CQQCh. 6 - Prob. 5CQQCh. 6 - Prob. 6CQQCh. 6 - In Exercises 6-10, assume that red blood cell...Ch. 6 - Prob. 8CQQCh. 6 - Prob. 9CQQCh. 6 - Prob. 10CQQCh. 6 - Prob. 1RECh. 6 - Prob. 2RECh. 6 - Window Placement Standing eye heights of men are...Ch. 6 - Sampling Distributions Scores on the ACT test have...Ch. 6 - Prob. 5RECh. 6 - Monorail and Airliner Doors The Mark VI monorail...Ch. 6 - Aircraft Safety Standards Under older Federal...Ch. 6 - Assessing Normality Listed below are the current...Ch. 6 - Prob. 9RECh. 6 - Prob. 10RECh. 6 - Miami Heat The following are current annual...Ch. 6 - Prob. 2CRECh. 6 - Birth Weights Birth weights in the United States...Ch. 6 - POTUS The accompanying graph is a histogram of...Ch. 6 - Left-Handedness According to data from the...Ch. 6 - Binomial Probabilities Section 6-7 described a...Ch. 6 - Prob. 1FDDCh. 6 - Prob. 2FDDCh. 6 - Prob. 3FDDCh. 6 - Critical Thinking: Designing aircraft seats When...Ch. 6 - Critical Thinking: Designing aircraft seats When...Ch. 6 - Critical Thinking: Designing aircraft seats When...
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