Targets: Bias or Lack of Precision? a. If a rifleman’s gunsight is adjusted incorrectly, he might shoot bullets consistently close to 2 feet left of the bull’s-eye target. Draw a sketch of the target with the bullet holes. Does this show lack of precision or bias? b. Draw a second sketch of the target if the shots are both unbiased and precise (have little variation). The rifleman’s aim is not perfect, so your sketches should show more than one bullet hole.
Targets: Bias or Lack of Precision? a. If a rifleman’s gunsight is adjusted incorrectly, he might shoot bullets consistently close to 2 feet left of the bull’s-eye target. Draw a sketch of the target with the bullet holes. Does this show lack of precision or bias? b. Draw a second sketch of the target if the shots are both unbiased and precise (have little variation). The rifleman’s aim is not perfect, so your sketches should show more than one bullet hole.
Solution Summary: The author explains that the sketch shows a lack of precision or bias. The bullets are hitting 2 feet left of the target consistently and the deviation between the bullet holes is less.
a. If a rifleman’s gunsight is adjusted incorrectly, he might shoot bullets consistently close to 2 feet left of the bull’s-eye target. Draw a sketch of the target with the bullet holes. Does this show lack of precision or bias?
b. Draw a second sketch of the target if the shots are both unbiased and precise (have little variation).
The rifleman’s aim is not perfect, so your sketches should show more than one bullet hole.
Problem 1.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%.
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.(d) We assume that you sell the American put to a market participant A for the pricefound in (b). Explain how you act on the market…
What is the standard scores associated to the left of z is 0.1446
Note: The purpose of this problem below is to use computational techniques (Excelspreadsheet, Matlab, R, Python, etc.) and code the dynamic programming ideas seen inclass. Please provide the numerical answer to the questions as well as a sample of yourwork (spreadsheet, code file, etc.).We consider an N-period binomial model with the following properties: N = 60, thecurrent stock price is S0 = 1000; on each period, the stock price increases by 0.5% whenit moves up and decreases by 0.3% when it moves down. The annual interest rate on themoney market is 5%. (Notice that this model is a CRR model, which means that thebinomial tree is recombining.)(a) Find the price at time t0 = 0 of a (European) call option with strike price K = 1040and maturity T = 1 year.(b) Find the price at time t0 = 0 of a (European) put option with strike price K = 1040and maturity T = 1 year.(c) We consider now, that you are at time t5 (i.e. after 5 periods, which represents 1month later). Assume that the stock…
Elementary Statistics: Picturing the World (7th Edition)
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