Introduction to Statistics and Data Analysis
5th Edition
ISBN: 9781305115347
Author: Roxy Peck; Chris Olsen; Jay L. Devore
Publisher: Brooks Cole
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Textbook Question
Chapter 7.1, Problem 1E
State whether each of the following random variables is discrete or continuous:
- a. The number of defective tires on a car
- b. The body temperature of a hospital patient
- c. The number of pages in a book
- d. The number of draws (with replacement) from a deck of playing cards until a heart is selected
- e. The lifetime of a lightbulb
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Problem 3. Pricing a multi-stock option the Margrabe formula
The purpose of this problem is to price a swap option in a 2-stock model, similarly as
what we did in the example in the lectures. We consider a two-dimensional Brownian
motion given by W₁ = (W(¹), W(2)) on a probability space (Q, F,P). Two stock prices
are modeled by the following equations:
dX
=
dY₁ =
X₁ (rdt+
rdt+0₁dW!)
(²)),
Y₁ (rdt+dW+0zdW!"),
with Xo
xo and Yo =yo. This corresponds to the multi-stock model studied in class,
but with notation (X+, Y₁) instead of (S(1), S(2)). Given the model above, the measure
P is already the risk-neutral measure (Both stocks have rate of return r). We write
σ = 0₁+0%. We consider a swap option, which gives you the right, at time T, to
exchange one share of X for one share of Y. That is, the option has payoff
F=(Yr-XT).
(a) We first assume that r = 0 (for questions (a)-(f)). Write an explicit expression for
the process Xt.
Reminder before proceeding to question (b): Girsanov's theorem…
Problem 1. Multi-stock model
We consider a 2-stock model similar to the one studied in class. Namely, we consider
=
S(1)
S(2)
=
S(¹) exp (σ1B(1) + (M1 - 0/1 )
S(²) exp (02B(2) + (H₂-
M2
where (B(¹) ) +20 and (B(2) ) +≥o are two Brownian motions, with
t≥0
Cov (B(¹), B(2)) = p min{t, s}.
"
The purpose of this problem is to prove that there indeed exists a 2-dimensional Brownian
motion (W+)+20 (W(1), W(2))+20 such that
=
S(1)
S(2)
=
=
S(¹) exp (011W(¹) + (μ₁ - 01/1) t)
롱)
S(²) exp (021W (1) + 022W(2) + (112 - 03/01/12) t).
where σ11, 21, 22 are constants to be determined (as functions of σ1, σ2, p).
Hint: The constants will follow the formulas developed in the lectures.
(a) To show existence of (Ŵ+), first write the expression for both W. (¹) and W (2)
functions of (B(1), B(²)).
as
(b) Using the formulas obtained in (a), show that the process (WA) is actually a 2-
dimensional standard Brownian motion (i.e. show that each component is normal,
with mean 0, variance t, and that their…
The scores of 8 students on the midterm exam and final exam were as follows.
Student
Midterm
Final
Anderson
98
89
Bailey
88
74
Cruz
87
97
DeSana
85
79
Erickson
85
94
Francis
83
71
Gray
74
98
Harris
70
91
Find the value of the (Spearman's) rank correlation coefficient test statistic that would be used to test the claim of no correlation between midterm score and final exam score. Round your answer to 3 places after the decimal point, if necessary.
Test statistic: rs =
Chapter 7 Solutions
Introduction to Statistics and Data Analysis
Ch. 7.1 - State whether each of the following random...Ch. 7.1 - Classify each of the following random variables as...Ch. 7.1 - Starting at a particular time, each car entering...Ch. 7.1 - A point is randomly selected from the interior of...Ch. 7.1 - A point is randomly selected on the surface of a...Ch. 7.1 - Prob. 6ECh. 7.1 - A box contains four slips of paper marked 1, 2, 3,...Ch. 7.2 - Let x be the number of courses for which a...Ch. 7.2 - Let y denote the number of broken eggs in a...Ch. 7.2 - Suppose that fund-raisers at a university call...
Ch. 7.2 - Airlines sometimes overbook flights. Suppose that...Ch. 7.2 - Suppose that a computer manufacturer receives...Ch. 7.2 - Simulate the chance experiment described in the...Ch. 7.2 - Of all airline flight requests received by a...Ch. 7.2 - Suppose that 20% of all homeowners in an...Ch. 7.2 - A box contains five slips of paper, marked 1, 1,...Ch. 7.2 - Components coming off an assembly line are either...Ch. 7.2 - A contractor is required by a county planning...Ch. 7.2 - A library subscribes to two different weekly news...Ch. 7.3 - Let x denote the lifetime (in thousands of hours)...Ch. 7.3 - A particular professor never dismisses class...Ch. 7.3 - Refer to the probability distribution given in the...Ch. 7.3 - The article “Modeling Sediment and Water Column...Ch. 7.3 - Let x denote the amount of gravel sold (in tons)...Ch. 7.3 - Let x be the amount of time (in minutes) that a...Ch. 7.3 - Prob. 26ECh. 7.4 - Consider selecting a household in rural Thailand...Ch. 7.4 - Suppose the probability distribution of x, the...Ch. 7.4 - Consider the following probability distribution...Ch. 7.4 - Referring to the previous exercise, use the result...Ch. 7.4 - Exercise 7.8 gave the following probability...Ch. 7.4 - Prob. 32ECh. 7.4 - Prob. 33ECh. 7.4 - Suppose that for a particular computer...Ch. 7.4 - A local television station sells 15-second,...Ch. 7.4 - An author has written a book and submitted it to a...Ch. 7.4 - A grocery store has an express line for customers...Ch. 7.4 - Prob. 38ECh. 7.4 - To assemble a piece of furniture, a wood peg must...Ch. 7.4 - A multiple-choice exam consists of 50 questions....Ch. 7.4 - Prob. 41ECh. 7.4 - Prob. 42ECh. 7.5 - Prob. 43ECh. 7.5 - The Los Angeles Times (December 13, 1992) reported...Ch. 7.5 - Refer to the previous exercise, and suppose that...Ch. 7.5 - Twenty-five percent of the customers of a grocery...Ch. 7.5 - Example 7.18 described a study in which a person...Ch. 7.5 - Prob. 49ECh. 7.5 - A breeder of show dogs is interested in the number...Ch. 7.5 - Prob. 51ECh. 7.5 - Prob. 52ECh. 7.5 - Suppose that the probability is 0.1 that any given...Ch. 7.5 - Suppose that 30% of all automobiles undergoing an...Ch. 7.5 - Suppose that you will take a multiple-choice exam...Ch. 7.5 - Suppose that 20% of the 10,000 signatures on a...Ch. 7.5 - Prob. 57ECh. 7.5 - Prob. 58ECh. 7.5 - Suppose a playlist on an MP3 music player consists...Ch. 7.5 - Sophie is a dog that loves to play catch....Ch. 7.5 - Suppose that 5% of cereal boxes contain a prize...Ch. 7.5 - Prob. 62ECh. 7.6 - Prob. 63ECh. 7.6 - Prob. 64ECh. 7.6 - Prob. 65ECh. 7.6 - Prob. 66ECh. 7.6 - Let z denote a variable that has a standard normal...Ch. 7.6 - Determine the value z that a. Separates the...Ch. 7.6 - Determine the value of z such that a. z and z...Ch. 7.6 - Because P(z 0.44) = 0.67, 67% of all z values are...Ch. 7.6 - Consider the population of all 1-gallon cans of...Ch. 7.6 - Consider babies born in the “normal” range of...Ch. 7.6 - Prob. 73ECh. 7.6 - The paper referenced in Example 7.30 (Estimating...Ch. 7.6 - The size of the left upper chamber of the heart is...Ch. 7.6 - The paper referenced in the previous exercise also...Ch. 7.6 - According to the paper "Commuters' Exposure to...Ch. 7.6 - A machine that cuts corks for wine bottles...Ch. 7.6 - Refer to the previous exercise. Suppose that there...Ch. 7.6 - A gasoline tank for a certain car is designed to...Ch. 7.6 - The time that it takes a randomly selected job...Ch. 7.6 - Suppose that the distribution of typing speed in...Ch. 7.7 - The authors of the paper Development of...Ch. 7.7 - The paper Risk Behavior, Decision Making, and...Ch. 7.7 - Prob. 85ECh. 7.7 - Macular degeneration is the most common cause of...Ch. 7.7 - Prob. 87ECh. 7.7 - Consider the following 10 observations on the...Ch. 7.7 - Prob. 89ECh. 7.7 - Prob. 90ECh. 7.7 - Prob. 91ECh. 7.7 - Prob. 92ECh. 7.7 - The figure on the next page appeared in the paper...Ch. 7.8 - Let x denote the IQ of an individual selected at...Ch. 7.8 - Suppose that the distribution of x = the number of...Ch. 7.8 - The number of vehicles leaving a turnpike at a...Ch. 7.8 - Prob. 97ECh. 7.8 - Prob. 98ECh. 7.8 - Prob. 99ECh. 7.8 - Suppose that 70% of the bicycles sold by a certain...Ch. 7.8 - Suppose that 25% of the fire alarms in a large...Ch. 7.8 - Suppose that 65% of all registered voters in a...Ch. 7.8 - Flashlight bulbs manufactured by a certain company...Ch. 7.8 - A company that manufactures mufflers for cars...Ch. 7 - Let x denote the duration of a randomly selected...Ch. 7 - A soft-drink machine dispenses only regular Coke...Ch. 7 - Prob. 107CRCh. 7 - Refer 10 the probability distribution given in...Ch. 7 - A new batterys voltage may be acceptable (A) or...Ch. 7 - A pizza company advertises that it puts 0.5 pounds...Ch. 7 - Suppose that fuel efficiency for a particular...Ch. 7 - A coin is flipped 25 times. Let x be the number of...Ch. 7 - The probability distribution of x, the number of...Ch. 7 - The amount of time spent by a statistical...Ch. 7 - The lifetime of a certain brand of battery is...Ch. 7 - A machine producing vitamin E capsules operates so...Ch. 7 - The Wall Street Journal (February 15, 1972)...Ch. 7 - The longest run of Ss in the sequence SSFSSSSFFS...Ch. 7 - Prob. 119CRCh. 7 - Four peoplea, b, c, and dare waiting to give...Ch. 7 - Kyle and Lygia are going to play a series of...Ch. 7 - Prob. 122CRCh. 7 - Suppose that your statistics professor tells you...Ch. 7 - Suppose that the pH of soil samples taken from a...Ch. 7 - The lightbulbs used to provide exterior lighting...Ch. 7 - Suppose there are approximately 40,000 travel...Ch. 7 - Prob. 1CRECh. 7 - Prob. 2CRECh. 7 - Prob. 3CRECh. 7 - Prob. 4CRECh. 7 - Prob. 5CRECh. 7 - Prob. 6CRECh. 7 - Two shipping services offer overnight delivery of...Ch. 7 - Prob. 8CRECh. 7 - Prob. 9CRECh. 7 - The Cedar Rapids Gazette (November 20, 1999)...Ch. 7 - Prob. 11CRECh. 7 - The article Men, Women at Odds on Gun Control...Ch. 7 - Suppose that a new Internet company Mumble.com...Ch. 7 - Refer to the previous exercise. Suppose that...Ch. 7 - A chemical supply company currently has in stock...Ch. 7 - Prob. 16CRECh. 7 - An experiment was conducted to investigate whether...Ch. 7 - A machine that produces ball bearings has...Ch. 7 - Consider the variable x = time required for a...Ch. 7 - Prob. 20CRECh. 7 - Prob. 21CRE
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