Guessing A 20-question multiple choice quiz has five choices for each question. Suppose that a student just guesses, hoping to get a high score. The teacher carries out a hypothesis test to determine whether the student was just guessing. The null hypothesis is p = 0.20 , where p is the probability of a correct answer. a. Which of the following describes the value of the z -test statistic that is likely to result? Explain your choice. i. The z -test statistic will be close to 0. ii. the z -test statistic will be far from 0. b. Which of the following describes the p-value that is likely to result? Explain your choice. i. The p-value will be small. ii. The p-value will not be small.
Guessing A 20-question multiple choice quiz has five choices for each question. Suppose that a student just guesses, hoping to get a high score. The teacher carries out a hypothesis test to determine whether the student was just guessing. The null hypothesis is p = 0.20 , where p is the probability of a correct answer. a. Which of the following describes the value of the z -test statistic that is likely to result? Explain your choice. i. The z -test statistic will be close to 0. ii. the z -test statistic will be far from 0. b. Which of the following describes the p-value that is likely to result? Explain your choice. i. The p-value will be small. ii. The p-value will not be small.
Solution Summary: The author explains that the teacher carries out a hypothesis test to determine if the student is randomly guessing or knows the answer.
Guessing A 20-question multiple choice quiz has five choices for each question. Suppose that a student just guesses, hoping to get a high score. The teacher carries out a hypothesis test to determine whether the student was just guessing. The null hypothesis is
p
=
0.20
, where
p
is the probability of a correct answer.
a. Which of the following describes the value of the
z
-test statistic that is likely to result? Explain your choice.
i. The
z
-test
statistic will be close to 0.
ii. the
z
-test
statistic will be far from 0.
b. Which of the following describes the p-value that is likely to result? Explain your choice.
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…
Chapter 8 Solutions
The King's minion: Richelieu, Louis XIII, and the affair of Cinq-Mars
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