Contemporary Mathematics for Business & Consumers
8th Edition
ISBN: 9781305886803
Author: Brechner
Publisher: Cengage
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Chapter 6.I, Problem 41RE
To determine
To calculate: The decimal and reduced fraction value of the chocolate chip cookies by using the pie chart.
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Several markets (Japan, Switzerland) introduced negative interest rates on their money market.
In this problem, we will consider an annual interest rate r < 0. We consider a stock modeled
by an N-period CRR model where each period is 1 year (At = 1) and the up and down factors
are u and d.
(a) We consider an American put option with strike price K and expiration T. Prove that if
<0, the optimal strategy is to wait until expiration T to exercise.
We consider an N-period CRR model where each period is 1 year (At = 1), the up factor is
u = 0.1, the down factor is d = e−0.3 and r = 0. We remind you that in the CRR model, the
stock price at time tn is modeled (under P) by
Sta
=
So exp (μtn + σ√AtZn),
where (Zn) is a simple symmetric random walk.
(a) Find the parameters μ and σ for the CRR model described above.
(b) Find P
Ste
So
55/50
€ > 1).
StN
(c) Find lim P
804-N
(d) Determine q. (You can use e- 1 x.)
Ste
(e) Find Q
So
(f) Find lim Q
004-N
StN
So
In this problem, we consider a 3-period stock market model with evolution given in Fig. 1 below.
Each period corresponds to one year. The interest rate is r = 0%.
16
22
28
12
16
12
8
4
2
time
Figure 1: Stock evolution for Problem 1.
(a) A colleague notices that in the model above, a movement up-down leads to the same value
as a movement down-up. He concludes that the model is a CRR model. Is your colleague
correct? (Explain your answer.)
(b) We consider a European put with strike price K = 10 and expiration T = 3 years. Find
the price of this option at time 0. Provide the replicating portfolio for the first period.
(c) In addition to the call above, we also consider a European call with strike price K = 10
and expiration T = 3 years. Which one has the highest price? (It is not necessary to
provide the price of the call.)
(d) We now assume a yearly interest rate r = 25%. We consider a Bermudan put option with
strike price K = 10. It works like a standard put, but you can exercise it…
Chapter 6 Solutions
Contemporary Mathematics for Business & Consumers
Ch. 6.I - Convert the following percents to decimals. a. 27%...Ch. 6.I - Convert the following decimals or whole numbers to...Ch. 6.I - Prob. 3TIECh. 6.I - Prob. 4TIECh. 6.I - Convert the following percents to decimals.
1.
Ch. 6.I - Prob. 2RECh. 6.I - Prob. 3RECh. 6.I - Prob. 4RECh. 6.I - Prob. 5RECh. 6.I - Prob. 6RE
Ch. 6.I - Prob. 7RECh. 6.I - Prob. 8RECh. 6.I - Prob. 9RECh. 6.I - Convert the following percents to decimals.
10....Ch. 6.I - Prob. 11RECh. 6.I - Prob. 12RECh. 6.I - Prob. 13RECh. 6.I - Prob. 14RECh. 6.I - Prob. 15RECh. 6.I - Prob. 16RECh. 6.I - Prob. 17RECh. 6.I - Convert the following decimals or whole numbers to...Ch. 6.I - Prob. 19RECh. 6.I - Prob. 20RECh. 6.I - Prob. 21RECh. 6.I - Prob. 22RECh. 6.I - Prob. 23RECh. 6.I - Prob. 24RECh. 6.I - Prob. 25RECh. 6.I - Prob. 26RECh. 6.I - Prob. 27RECh. 6.I - Prob. 28RECh. 6.I - Prob. 29RECh. 6.I - Prob. 30RECh. 6.I - Prob. 31RECh. 6.I - Prob. 32RECh. 6.I - Prob. 33RECh. 6.I - Prob. 34RECh. 6.I - Prob. 35RECh. 6.I - Prob. 36RECh. 6.I - Prob. 37RECh. 6.I - Prob. 38RECh. 6.I - Prob. 39RECh. 6.I - Prob. 40RECh. 6.I - Prob. 41RECh. 6.I - Prob. 42RECh. 6.I - Prob. 43RECh. 6.I - Prob. 44RECh. 6.I - Prob. 45RECh. 6.I - 46. You have been asked to make a presentation...Ch. 6.II - Solve the following for the portion. What is the...Ch. 6.II - Prob. 6TIECh. 6.II - Solve the following for the portion.
a. Premier...Ch. 6.II - Prob. 8TIECh. 6.II - Prob. 9TIECh. 6.II - Prob. 10TIECh. 6.II - Prob. 11TIECh. 6.II - Prob. 12TIECh. 6.II - Solve the following for the base. Round to...Ch. 6.II - Prob. 1RECh. 6.II - Prob. 2RECh. 6.II - Prob. 3RECh. 6.II - Prob. 4RECh. 6.II - Solve the following for the portion. Round to...Ch. 6.II - Prob. 6RECh. 6.II - Prob. 7RECh. 6.II - Solve the following for the portion. Round to...Ch. 6.II - Prob. 9RECh. 6.II - Prob. 10RECh. 6.II - Prob. 11RECh. 6.II - Prob. 12RECh. 6.II - Prob. 13RECh. 6.II - 14. What is the rate if the base is 288 and the...Ch. 6.II - Solve the following for the rate. Round to the...Ch. 6.II - Solve the following for the rate. Round to the...Ch. 6.II - Prob. 17RECh. 6.II - Solve the following for the rate. Round to the...Ch. 6.II - Prob. 19RECh. 6.II - Solve the following for the rate. Round to the...Ch. 6.II - Prob. 21RECh. 6.II - Prob. 22RECh. 6.II - Prob. 23RECh. 6.II - Solve the following for the base. Round to...Ch. 6.II - Prob. 25RECh. 6.II - Solve the following for the base. Round to...Ch. 6.II - Prob. 27RECh. 6.II - Prob. 28RECh. 6.II - Prob. 29RECh. 6.II - Solve the following for the base. Round to...Ch. 6.II - Solve the following word problems for the portion,...Ch. 6.II - Solve the following word problems for the portion,...Ch. 6.II - Prob. 33RECh. 6.II - Solve the following word problems for the portion,...Ch. 6.II - Solve the following word problems for the portion,...Ch. 6.II - Prob. 36RECh. 6.II - Prob. 37RECh. 6.II - Solve the following word problems for the portion,...Ch. 6.II - Solve the following word problems for the portion,...Ch. 6.II - Solve the following word problems for the portion,...Ch. 6.II - Solve the following word problems for the portion,...Ch. 6.II - Solve the following word problems for the portion,...Ch. 6.II - Prob. 43RECh. 6.II - Solve the following word problems for the portion,...Ch. 6.II - Use the pie chart "Century Mutual Fund -...Ch. 6.II - Use the pie chart "Century Mutual Fund -...Ch. 6.II - Prob. 47RECh. 6.II - Use the pie chart "Century Mutual Fund -...Ch. 6.II - 49. You are the catering manager for the Imperial...Ch. 6.III - Solve the following problem for the rate of...Ch. 6.III - Solve the following problem for the rate of...Ch. 6.III - Solve the following problem for the rate of...Ch. 6.III - Prob. 17TIECh. 6.III - Prob. 18TIECh. 6.III - Solve the following business situation for the new...Ch. 6.III - Solve the following business situation for the...Ch. 6.III - Solve the following business situation for the...Ch. 6.III - Prior to an election, a political research firm...Ch. 6.III - Solve the following increase or decrease problems...Ch. 6.III - Prob. 2RECh. 6.III - Solve the following increase or decrease problems...Ch. 6.III - Solve the following increase or decrease problems...Ch. 6.III - Prob. 5RECh. 6.III - Prob. 6RECh. 6.III - Prob. 7RECh. 6.III - Solve the following increase or decrease problems...Ch. 6.III - Prob. 9RECh. 6.III - Prob. 10RECh. 6.III - Over a two-month period, the number of weekly...Ch. 6.III - Sunshine Honda sold 112 cars this month. If that...Ch. 6.III - 13. At a Sports King store, 850 tennis racquets...Ch. 6.III - At a Safeway Supermarket, the price of yellow...Ch. 6.III - 15. According to the American Association of...Ch. 6.III - 16. Housing prices in Foster County have increased...Ch. 6.III - At Campers Paradise, sales have increased 15%,...Ch. 6.III - 18. According to the U.S. Census Bureau, in 1950,...Ch. 6.III - 19. After a vigorous promotion campaign. Crunchy...Ch. 6.III - 20. The chart “Chip Rivalry" illustrates the...Ch. 6.III - 21. Economic reports indicate that during a recent...Ch. 6 - 1. A percent is a way of expressing a part of).a...Ch. 6 - Prob. 2CRCh. 6 - 3. Percent means “parts per ______.” The percent...Ch. 6 - Prob. 4CRCh. 6 - Prob. 5CRCh. 6 - Prob. 6CRCh. 6 - Prob. 7CRCh. 6 - Prob. 8CRCh. 6 - Prob. 9CRCh. 6 - In the percentage formula, the___ is the variable...Ch. 6 - Prob. 11CRCh. 6 - Prob. 12CRCh. 6 - Prob. 13CRCh. 6 - Prob. 14CRCh. 6 - Prob. 1ATCh. 6 - Prob. 2ATCh. 6 - Prob. 3ATCh. 6 - Prob. 4ATCh. 6 - Prob. 5ATCh. 6 - Prob. 6ATCh. 6 - Prob. 7ATCh. 6 - Prob. 8ATCh. 6 - Prob. 9ATCh. 6 - Prob. 10ATCh. 6 - Prob. 11ATCh. 6 - Prob. 12ATCh. 6 - Prob. 13ATCh. 6 - Prob. 14ATCh. 6 - Prob. 15ATCh. 6 - Prob. 16ATCh. 6 - Prob. 17ATCh. 6 - Prob. 18ATCh. 6 - Prob. 19ATCh. 6 - Prob. 20ATCh. 6 - Prob. 21ATCh. 6 - Prob. 22ATCh. 6 - Prob. 23ATCh. 6 - Prob. 24ATCh. 6 - Solve the following for the portion, rate, or...Ch. 6 - Prob. 26ATCh. 6 - Prob. 27ATCh. 6 - Prob. 28ATCh. 6 - Solve the following for the portion, rate, or...Ch. 6 - Solve the following for the portion, rate, or...Ch. 6 - Prob. 31ATCh. 6 - Prob. 32ATCh. 6 - Solve the following word problems for the unknown....Ch. 6 - Solve the following word problems for the unknown....Ch. 6 - Solve the following word problems for the unknown....Ch. 6 - Solve the following word problems for the unknown....Ch. 6 - Solve the following word problems for the unknown....Ch. 6 - Solve the following word problems for the unknown....Ch. 6 - Solve the following word problems for the unknown....Ch. 6 - Solve the following word problems for the unknown....Ch. 6 - Solve the following word problems for the unknown....Ch. 6 - Prob. 42ATCh. 6 - Solve the following word problems for the unknown....Ch. 6 - Solve the following word problems for the unknown....Ch. 6 - 45. An insurance adjuster for UPS found that 12%...Ch. 6 - 46. Morley Fast, a contractor, built a warehouse...Ch. 6 - Use the chart The Rise of E-Books in Education for...Ch. 6 - Use the chart “The Rise of E-Books in Education”...Ch. 6 - Use the chart “The Rise of E-Books in Education”...
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- In this problem, we consider a 2-period stock market model with evolution given in Fig. 1 below. Each period corresponds to one year (At = 1). The yearly interest rate is r = 1/3 = 33%. This model is a CRR model. 25 15 9 10 6 4 time Figure 1: Stock evolution for Problem 1. (a) Find the values of up and down factors u and d, and the risk-neutral probability q. (b) We consider a European put with strike price K the price of this option at time 0. == 16 and expiration T = 2 years. Find (c) Provide the number of shares of stock that the replicating portfolio contains at each pos- sible position. (d) You find this option available on the market for $2. What do you do? (Short answer.) (e) We consider an American put with strike price K = 16 and expiration T = 2 years. Find the price of this option at time 0 and describe the optimal exercising strategy. (f) We consider an American call with strike price K ○ = 16 and expiration T = 2 years. Find the price of this option at time 0 and describe…arrow_forwardNo chatgpt pls will upvote Alreadyarrow_forwardFind the LaPla se trnsofrom of a) chi-square Distribution. b) Normal Distribution. C) Gamma Distribution. prove that Binomial (n, 2) Poisson (2) *********************arrow_forward
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