Elementary Statistics Plus MyLab Statistics with Pearson eText -- Access Card Package (7th Edition) (What's New in Statistics)
7th Edition
ISBN: 9780134684901
Author: Ron Larson, Betsy Farber
Publisher: PEARSON
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Chapter 7.1, Problem 3E
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To describe: The two decisions that can be made from performing a hypothesis test.
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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
Elementary Statistics Plus MyLab Statistics with Pearson eText -- Access Card Package (7th Edition) (What's New in Statistics)
Ch. 7.1 - Write each claim as a mathematical statement....Ch. 7.1 - A company specializing in parachute assembly...Ch. 7.1 - For each claim, state H0 and Ha in words and in...Ch. 7.1 - You perform a hypothesis test for each claim. How...Ch. 7.1 - 1. You represent a chemical company that is being...Ch. 7.1 - What are the two types of hypotheses used in a...Ch. 7.1 - Describe the two types of errors possible in a...Ch. 7.1 - Prob. 3ECh. 7.1 - Does failing to reject the null hypothesis mean...Ch. 7.1 - True or False? In Exercises 510, determine whether...
Ch. 7.1 - True or False? In Exercises 510, determine whether...Ch. 7.1 - True or False? In Exercises 510, determine whether...Ch. 7.1 - True or False? In Exercises 510, determine whether...Ch. 7.1 - True or False? In Exercises 510, determine whether...Ch. 7.1 - True or False? In Exercises 510, determine whether...Ch. 7.1 - Stating Hypotheses In Exercises 1116, the...Ch. 7.1 - Stating Hypotheses In Exercises 1116, the...Ch. 7.1 - Stating Hypotheses In Exercises 1116, the...Ch. 7.1 - Stating Hypotheses In Exercises 1116, the...Ch. 7.1 - Stating Hypotheses In Exercises 1116, the...Ch. 7.1 - Stating Hypotheses In Exercises 1116, the...Ch. 7.1 - Graphical Analysis In Exercises 1720, match the...Ch. 7.1 - Graphical Analysis In Exercises 1720, match the...Ch. 7.1 - Graphical Analysis In Exercises 1720, match the...Ch. 7.1 - Graphical Analysis In Exercises 1720, match the...Ch. 7.1 - Identifying a Test In Exercises 2124, determine...Ch. 7.1 - Identifying a Test In Exercises 2124, determine...Ch. 7.1 - Identifying a Test In Exercises 2124, determine...Ch. 7.1 - Identifying a Test In Exercises 2124, determine...Ch. 7.1 - Stating the Null and Alternative Hypotheses In...Ch. 7.1 - Stating the Null and Alternative Hypotheses In...Ch. 7.1 - Stating the Null and Alternative Hypotheses In...Ch. 7.1 - Stating the Null and Alternative Hypotheses In...Ch. 7.1 - Stating the Null and Alternative Hypotheses In...Ch. 7.1 - Stating the Null and Alternative Hypotheses In...Ch. 7.1 - Identifying Type I and Type II Errors In Exercises...Ch. 7.1 - Identifying Type I and Type II Errors In Exercises...Ch. 7.1 - Identifying Type I and Type II Errors In Exercises...Ch. 7.1 - Identifying Type I and Type II Errors In Exercises...Ch. 7.1 - Identifying Type I and Type II Errors In Exercises...Ch. 7.1 - Identifying Type I and Type II Errors In Exercises...Ch. 7.1 - Identifying the Nature of a Hypothesis Test In...Ch. 7.1 - Identifying the Nature of a Hypothesis Test In...Ch. 7.1 - Identifying the Nature of a Hypothesis Test In...Ch. 7.1 - Identifying the Nature of a Hypothesis Test In...Ch. 7.1 - Identifying the Nature of a Hypothesis Test In...Ch. 7.1 - Identifying the Nature of a Hypothesis Test In...Ch. 7.1 - Interpreting a Decision In Exercises 4348,...Ch. 7.1 - Interpreting a Decision In Exercises 4348,...Ch. 7.1 - Interpreting a Decision In Exercises 4348,...Ch. 7.1 - Interpreting a Decision In Exercises 4348,...Ch. 7.1 - Interpreting a Decision In Exercises 4348,...Ch. 7.1 - Interpreting a Decision In Exercises 4348,...Ch. 7.1 - Writing Hypotheses: Medicine A medical research...Ch. 7.1 - Writing Hypotheses: Transportation Network Company...Ch. 7.1 - Writing Hypotheses: Backpack Manufacturer A...Ch. 7.1 - Writing Hypotheses: Internet Provider An Internet...Ch. 7.1 - Prob. 53ECh. 7.1 - Getting at the Concept Explain why a level of...Ch. 7.1 - Prob. 55ECh. 7.1 - Prob. 56ECh. 7.1 - Graphical Analysis In Exercises 5760, you are...Ch. 7.1 - Graphical Analysis In Exercises 5760, you are...Ch. 7.1 - Graphical Analysis In Exercises 5760, you are...Ch. 7.1 - Graphical Analysis In Exercises 5760, you are...Ch. 7.2 - The P-value for a hypothesis test is P = 0.0745....Ch. 7.2 - Find the P-value for a left-tailed hypothesis test...Ch. 7.2 - Find the P-value for a two-tailed hypothesis test...Ch. 7.2 - Homeowners claim that the mean speed of...Ch. 7.2 - According to a study of employed U.S. adults ages...Ch. 7.2 - Repeat Example 6 using a level of significance of ...Ch. 7.2 - Find the critical value and rejection region for a...Ch. 7.2 - Find the critical values and rejection regions for...Ch. 7.2 - The CEO of the company in Example 9 claims that...Ch. 7.2 - In Example 10, at = 0.01, is there enough...Ch. 7.2 - Explain the difference between the z-test for ...Ch. 7.2 - In hypothesis testing, does using the critical...Ch. 7.2 - Interpreting a P-Value In Exercises 38, the...Ch. 7.2 - Interpreting a P-Value In Exercises 38, the...Ch. 7.2 - Interpreting a P-Value In Exercises 38, the...Ch. 7.2 - Interpreting a P-Value In Exercises 38, the...Ch. 7.2 - Interpreting a P-Value In Exercises 38, the...Ch. 7.2 - Interpreting a P-Value In Exercises 38, the...Ch. 7.2 - Finding a P-Value In Exercises 914, find the...Ch. 7.2 - Finding a P-Value In Exercises 914, find the...Ch. 7.2 - Finding a P-Value In Exercises 914, find the...Ch. 7.2 - Finding a P-Value In Exercises 914, find the...Ch. 7.2 - Finding a P-Value In Exercises 914, find the...Ch. 7.2 - Finding a P-Value In Exercises 914, find the...Ch. 7.2 - Graphical Analysis In Exercises 15 and 16, match...Ch. 7.2 - Graphical Analysis In Exercises 15 and 16, match...Ch. 7.2 - In Exercises 17 and 18, use the TI-84 Plus...Ch. 7.2 - In Exercises 17 and 18, use the TI-84 Plus...Ch. 7.2 - Finding Critical Values and Rejection Regions In...Ch. 7.2 - Finding Critical Values and Rejection Regions In...Ch. 7.2 - Finding Critical Values and Rejection Regions In...Ch. 7.2 - Finding Critical Values and Rejection Regions In...Ch. 7.2 - Finding Critical Values and Rejection Regions In...Ch. 7.2 - Finding Critical Values and Rejection Regions In...Ch. 7.2 - Graphical Analysis In Exercises 25 and 26, state...Ch. 7.2 - Graphical Analysis In Exercises 25 and 26, state...Ch. 7.2 - In Exercises 2730, test the claim about the...Ch. 7.2 - In Exercises 2730, test the claim about the...Ch. 7.2 - In Exercises 2730, test the claim about the...Ch. 7.2 - In Exercises 2730, test the claim about the...Ch. 7.2 - Hypothesis Testing Using a P-Value In Exercises...Ch. 7.2 - Hypothesis Testing Using a P-Value In Exercises...Ch. 7.2 - Hypothesis Testing Using a P-Value In Exercises...Ch. 7.2 - Hypothesis Testing Using a P-Value In Exercises...Ch. 7.2 - Hypothesis Testing Using a P-Value In Exercises...Ch. 7.2 - Hypothesis Testing Using a P-Value In Exercises...Ch. 7.2 - Hypothesis Testing Using Rejection Region(s) In...Ch. 7.2 - Hypothesis Testing Using Rejection Region(s) In...Ch. 7.2 - Hypothesis Testing Using Rejection Region(s) In...Ch. 7.2 - Hypothesis Testing Using Rejection Region(s) In...Ch. 7.2 - Hypothesis Testing Using Rejection Region(s) In...Ch. 7.2 - Hypothesis Testing Using Rejection Region(s) In...Ch. 7.2 - Writing When P , does the standardized test...Ch. 7.2 - Writing In a right-tailed test where P , does the...Ch. 7.3 - Find the critical value for a left-tailed test...Ch. 7.3 - Find the critical value t0 for a right-tailed lest...Ch. 7.3 - Find the critical values t0 and t0 for a...Ch. 7.3 - An industry analyst says that the mean age of a...Ch. 7.3 - The company in Example 5 claims that the mean...Ch. 7.3 - Another department of motor vehicles office claims...Ch. 7.3 - Explain how to find critical values for a...Ch. 7.3 - Explain how to use a t-test to test a hypothesized...Ch. 7.3 - In Exercises 38, find the critical value(s) and...Ch. 7.3 - In Exercises 38, find the critical value(s) and...Ch. 7.3 - In Exercises 38, find the critical value(s) and...Ch. 7.3 - In Exercises 38, find the critical value(s) and...Ch. 7.3 - In Exercises 38, find the critical value(s) and...Ch. 7.3 - In Exercises 38, find the critical value(s) and...Ch. 7.3 - Graphical Analysis In Exercises 912, state whether...Ch. 7.3 - Graphical Analysis In Exercises 912, state whether...Ch. 7.3 - Graphical Analysis In Exercises 912, state whether...Ch. 7.3 - Graphical Analysis In Exercises 912, state whether...Ch. 7.3 - In Exercises 1318, test the claim about the...Ch. 7.3 - In Exercises 1318, test the claim about the...Ch. 7.3 - In Exercises 1318, test the claim about the...Ch. 7.3 - In Exercises 1318, test the claim about the...Ch. 7.3 - In Exercises 1318, test the claim about the...Ch. 7.3 - In Exercises 1318, test the claim about the...Ch. 7.3 - Hypothesis Testing Using Rejection Regions In...Ch. 7.3 - Hypothesis Testing Using Rejection Regions In...Ch. 7.3 - Hypothesis Testing Using Rejection Regions In...Ch. 7.3 - Hypothesis Testing Using Rejection Regions In...Ch. 7.3 - Hypothesis Testing Using Rejection Regions In...Ch. 7.3 - Hypothesis Testing Using Rejection Regions In...Ch. 7.3 - Hypothesis Testing Using Rejection Regions In...Ch. 7.3 - Hypothesis Testing Using Rejection Regions In...Ch. 7.3 - Using a P-Value with a t-Test In Exercises 2730,...Ch. 7.3 - Using a P-Value with a t-Test In Exercises 2730,...Ch. 7.3 - Using a P-Value with a t-Test In Exercises 2730,...Ch. 7.3 - Using a P-Value with a t-Test In Exercises 2730,...Ch. 7.3 - Deciding on a Distribution In Exercises 31 and 32,...Ch. 7.3 - Prob. 32ECh. 7.3 - Writing You are testing a claim and incorrectly...Ch. 7.3 - Set n = 15, Mean = 40, Std. Dev. = 5, and the...Ch. 7.3 - Prob. 2ACh. 7.3 - Set n = 25, Mean = 25, Std. Dev. = 3, and the...Ch. 7.3 - Human Body Temperature: Whats Normal? In an...Ch. 7.3 - Human Body Temperature: Whats Normal? In an...Ch. 7.3 - Human Body Temperature: Whats Normal? In an...Ch. 7.3 - Human Body Temperature: Whats Normal? In an...Ch. 7.3 - Human Body Temperature: Whats Normal? In an...Ch. 7.3 - In an article in the Journal of Statistics...Ch. 7.4 - A researcher claims that more than 90% of U.S....Ch. 7.4 - A researcher claims that 67% of U.S. adults...Ch. 7.4 - Explain how to determine whether a normal...Ch. 7.4 - Explain how to test a population proportion p.Ch. 7.4 - In Exercises 36, determine whether a normal...Ch. 7.4 - In Exercises 36, determine whether a normal...Ch. 7.4 - In Exercises 36, determine whether a normal...Ch. 7.4 - In Exercises 36, determine whether a normal...Ch. 7.4 - Hypothesis Testing Using Rejection Regions In...Ch. 7.4 - Hypothesis Testing Using Rejection Regions In...Ch. 7.4 - Hypothesis Testing Using Rejection Regions In...Ch. 7.4 - Working Students An education researcher claims...Ch. 7.4 - Hypothesis Testing Using Rejection Regions In...Ch. 7.4 - Hypothesis Testing Using Rejection Regions In...Ch. 7.4 - Hypothesis Testing Using a P-Value In Exercises...Ch. 7.4 - Hypothesis Testing Using a P-Value In Exercises...Ch. 7.4 - Hypothesis Testing Using a P-Value In Exercises...Ch. 7.4 - Hypothesis Testing Using a P-Value In Exercises...Ch. 7.4 - Protecting the Environment In Exercises 17 and 18,...Ch. 7.4 - What Are Peoples Attitudes About Protecting the...Ch. 7.4 - Alternative Formula In Exercises 19 and 20, use...Ch. 7.4 - The alternative formula is derived from the...Ch. 7.4 - Set n = 25 and True p = 0.35. Test the claim that...Ch. 7.4 - Prob. 2ACh. 7.5 - Find the critical value02 right-tailed test when n...Ch. 7.5 - Prob. 2TYCh. 7.5 - Prob. 3TYCh. 7.5 - A bottling company claims that the variance of the...Ch. 7.5 - Prob. 5TYCh. 7.5 - A company that offers dieting products and weight...Ch. 7.5 - Explain how to find critical values in a...Ch. 7.5 - Can a critical value for the chi-square test be...Ch. 7.5 - Prob. 3ECh. 7.5 - Prob. 4ECh. 7.5 - In Exercises 512, find the critical value(s) and...Ch. 7.5 - In Exercises 512, find the critical value(s) and...Ch. 7.5 - In Exercises 512, find the critical value(s) and...Ch. 7.5 - In Exercises 512, find the critical value(s) and...Ch. 7.5 - In Exercises 512, find the critical value(s) and...Ch. 7.5 - In Exercises 512, find the critical value(s) and...Ch. 7.5 - In Exercises 512, find the critical value(s) and...Ch. 7.5 - In Exercises 512, find the critical value(s) and...Ch. 7.5 - Graphical Analysis In Exercises 13 and 14, state...Ch. 7.5 - Prob. 14ECh. 7.5 - In Exercises 1522, test the claim about the...Ch. 7.5 - Prob. 16ECh. 7.5 - In Exercises 1522, test the claim about the...Ch. 7.5 - In Exercises 1522, test the claim about the...Ch. 7.5 - In Exercises 1522, test the claim about the...Ch. 7.5 - Prob. 20ECh. 7.5 - In Exercises 1522, test the claim about the...Ch. 7.5 - In Exercises 1522, test the claim about the...Ch. 7.5 - Hypothesis Testing Using Rejection Regions In...Ch. 7.5 - Hypothesis Testing Using Rejection Regions In...Ch. 7.5 - Hypothesis Testing Using Rejection Regions In...Ch. 7.5 - Hypothesis Testing Using Rejection Regions In...Ch. 7.5 - Hypothesis Testing Using Rejection Regions In...Ch. 7.5 - Hypothesis Testing Using Rejection Regions In...Ch. 7.5 - Hypothesis Testing Using Rejection Regions In...Ch. 7.5 - Hypothesis Testing Using Rejection Regions In...Ch. 7.5 - Prob. 31ECh. 7.5 - Prob. 32ECh. 7.5 - Prob. 33ECh. 7.5 - Prob. 34ECh. 7 - EXERCISES In Exercises 13, assume that you work...Ch. 7 - Describe how your report could make a type I...Ch. 7 - Prob. 3UACh. 7 - In Exercises 16, the statement represents a claim....Ch. 7 - In Exercises 16, the statement represents a claim....Ch. 7 - Prob. 7.1.3RECh. 7 - In Exercises 16, the statement represents a claim....Ch. 7 - Prob. 7.1.5RECh. 7 - In Exercises 16, the statement represents a claim....Ch. 7 - In Exercises 710, (a) state the null and...Ch. 7 - Prob. 7.1.8RECh. 7 - Prob. 7.1.9RECh. 7 - In Exercises 710, (a) state the null and...Ch. 7 - In Exercises 11 and 12, find the P-value for the...Ch. 7 - Prob. 7.2.12RECh. 7 - Prob. 7.2.13RECh. 7 - In Exercises 1316, find the critical value(s) and...Ch. 7 - Prob. 7.2.15RECh. 7 - Prob. 7.2.16RECh. 7 - Prob. 7.2.17RECh. 7 - In Exercises 1720, state whether the standardized...Ch. 7 - In Exercises 1720, state whether the standardized...Ch. 7 - In Exercises 1720, state whether the standardized...Ch. 7 - In Exercises 2124, test the claim about the...Ch. 7 - In Exercises 2124, test the claim about the...Ch. 7 - In Exercises 2124, test the claim about the...Ch. 7 - Prob. 7.2.24RECh. 7 - In Exercises 25 and 26, (a) identify the claim and...Ch. 7 - In Exercises 25 and 26, (a) identify the claim and...Ch. 7 - In Exercises 27 and 28, (a) identify the claim and...Ch. 7 - In Exercises 27 and 28, (a) identify the claim and...Ch. 7 - Prob. 7.3.29RECh. 7 - In Exercises 2934, find the critical value(s) and...Ch. 7 - In Exercises 2934, find the critical value(s) and...Ch. 7 - Prob. 7.3.32RECh. 7 - Prob. 7.3.33RECh. 7 - In Exercises 2934, find the critical value(s) and...Ch. 7 - Prob. 7.3.35RECh. 7 - Prob. 7.3.36RECh. 7 - In Exercises 3540, test the claim about the...Ch. 7 - In Exercises 3540, test the claim about the...Ch. 7 - Prob. 7.3.39RECh. 7 - Prob. 7.3.40RECh. 7 - In Exercises 41 and 42, (a) identify the claim and...Ch. 7 - In Exercises 41 and 42, (a) identify the claim and...Ch. 7 - In Exercises 43 and 44, (a) identify the claim and...Ch. 7 - Prob. 7.3.44RECh. 7 - Prob. 7.4.45RECh. 7 - In Exercises 4548, determine whether a normal...Ch. 7 - Prob. 7.4.47RECh. 7 - In Exercises 4548, determine whether a normal...Ch. 7 - Prob. 7.4.49RECh. 7 - In Exercises 49 and 50, (a) identify the claim and...Ch. 7 - Prob. 7.5.51RECh. 7 - Prob. 7.5.52RECh. 7 - Prob. 7.5.53RECh. 7 - Prob. 7.5.54RECh. 7 - Prob. 7.5.55RECh. 7 - Prob. 7.5.56RECh. 7 - Prob. 7.5.57RECh. 7 - In Exercises 5558, test the claim about the...Ch. 7 - Prob. 7.5.59RECh. 7 - Prob. 7.5.60RECh. 7 - Prob. 7.5.61RECh. 7 - Prob. 7.5.62RECh. 7 - Take this quiz as you would take a quiz in class....Ch. 7 - Prob. 2CQCh. 7 - Take this quiz as you would take a quiz in class....Ch. 7 - Prob. 4CQCh. 7 - Prob. 5CQCh. 7 - Prob. 6CQCh. 7 - Take this test as you would take a test in class....Ch. 7 - Take this test as you would take a test in class....Ch. 7 - Take this test as you would take a test in class....Ch. 7 - Take this test as you would take a test in class....Ch. 7 - Take this quiz as you would take a quiz in class....Ch. 7 - Take this test as you would take a test in class....Ch. 7 - Take this quiz as you would take a quiz in class....Ch. 7 - Supporting a Claim You want your test to support a...Ch. 7 - Testing a Claim You want to claim that students at...Ch. 7 - Testing a Claim You want to claim that your...Ch. 7 - EXERCISES 1. The Minilab display below shows a...Ch. 7 - In Exercise 1, you rejected the claim that p =...Ch. 7 - Describe a hypothesis test for Judge Fords random...
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Publisher:McGraw Hill
College Algebra
Algebra
ISBN:9781305115545
Author:James Stewart, Lothar Redlin, Saleem Watson
Publisher:Cengage Learning
Statistics 4.1 Introduction to Inferential Statistics; Author: Dr. Jack L. Jackson II;https://www.youtube.com/watch?v=QLo4TEvBvK4;License: Standard YouTube License, CC-BY