Elementary Statistics: A Step By Step Approach
10th Edition
ISBN: 9781259755330
Author: Allan G. Bluman
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 8.1, Problem 1E
Define null and alternative hypotheses, and give an example of each.
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Students have asked these similar questions
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 8 Solutions
Elementary Statistics: A Step By Step Approach
Ch. 8.1 - Applying the Concepts 81 Eggs and Your Health The...Ch. 8.1 - Define null and alternative hypotheses, and give...Ch. 8.1 - What is meant by a type I error? A type II error?...Ch. 8.1 - What is meant by a statistical test?Ch. 8.1 - Explain the difference between a one-tailed and a...Ch. 8.1 - What is meant by the critical region? The...Ch. 8.1 - What symbols are used to represent the null...Ch. 8.1 - What symbols are used to represent the...Ch. 8.1 - Explain what is meant by a significant difference.Ch. 8.1 - When should a one-tailed test be used? A...
Ch. 8.1 - In hypothesis testing, why cant the hypothesis be...Ch. 8.1 - Using the z table (Table E), find the critical...Ch. 8.1 - Using the z table (Table E), find the critical...Ch. 8.1 - For each conjecture, state the null and...Ch. 8.1 - For each conjecture, state the null and...Ch. 8.2 - Car Thefts You recently received a job with a...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - Reject or Not State whether the null hypothesis...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - For Exercises 1 through 25, perform each of the...Ch. 8.2 - Transmission Service A car dealer recommends that...Ch. 8.2 - Speeding Tickets A motorist claims that the South...Ch. 8.2 - Sick Days A manager states that in his factory,...Ch. 8.2 - Significance Levels Suppose a statistician chose...Ch. 8.2 - Hourly Wage The president of a company states that...Ch. 8.3 - How Much Nicotine Is in Those Cigarettes? A...Ch. 8.3 - In what ways is the t distribution similar to the...Ch. 8.3 - What are the degrees of freedom for the t test?Ch. 8.3 - Find the critical value (or values) for the t test...Ch. 8.3 - Find the critical value (or values) for the t test...Ch. 8.3 - Using Table F, find the P-value interval for each...Ch. 8.3 - Using Table F, find the P-value interval for each...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.3 - For Exercises 7 through 23, perform each of the...Ch. 8.4 - What were the statistical hypotheses? 2. What were...Ch. 8.4 - Give three examples of proportions.Ch. 8.4 - Why is a proportion considered a binomial...Ch. 8.4 - When you are testing hypotheses by using...Ch. 8.4 - What are the mean and the standard deviation of a...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - Youth Smoking Researchers suspect that 18% of all...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - For Exercises 5 through 20, perform each of the...Ch. 8.4 - When np or nq is not 5 or more, the binomial table...Ch. 8.4 - First-Class Airline Passengers In the past, 20% of...Ch. 8.4 - Show that Z=pppqn can be derived from z=Xu by...Ch. 8.5 - Testing Gas Mileage Claims Assume that you are...Ch. 8.5 - Using Table G, find the critical value(s) for...Ch. 8.5 - Using Table G, find the critical value(s) for...Ch. 8.5 - Using Table G, find the P-value interval for each...Ch. 8.5 - Using Table G, find the P-value interval for each...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - Tornado Deaths A researcher claims that the...Ch. 8.5 - Interstate Speeds It has been reported that the...Ch. 8.5 - Nicotine Content of Cigarettes A manufacturer of...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.5 - For Exercises 5 through 20, assume that the...Ch. 8.6 - First-Time Births According to the almanac, the...Ch. 8.6 - One-Way Airfares The average one-way airfare from...Ch. 8.6 - Prob. 3ECh. 8.6 - Prison Time According to a public service website,...Ch. 8.6 - Working at Home Workers with a formal arrangement...Ch. 8.6 - Newspaper Reading Times A survey taken several...Ch. 8.6 - Prob. 7ECh. 8.6 - How is the power of a test related to the type II...Ch. 8.6 - Prob. 9ECh. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - Prob. 8.4.12RECh. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 1 through 20, perform each of the...Ch. 8 - For Exercises 5 through 20, assume that the...Ch. 8 - For Exercises 5 through 20, assume that the...Ch. 8 - For Exercises 5 through 20, assume that the...Ch. 8 - For Exercises 5 through 20, assume that the...Ch. 8 - Plant Leaf Lengths A biologist knows that the...Ch. 8 - Tire Inflation To see whether people are keeping...Ch. 8 - The Data Bank is found in Appendix B, or on the...Ch. 8 - Select a random sample of 15 individuals and test...Ch. 8 - Select a random sample of at least 30 individuals,...Ch. 8 - Select a sample of 20 individuals and test the...Ch. 8 - Using the data from Data Set XIII, select a sample...Ch. 8 - Using the data obtained in Exercise 5, test the...Ch. 8 - Determine whether each statement is true or false....Ch. 8 - Determine whether each statement is true or false....Ch. 8 - Determine whether each statement is true or false....Ch. 8 - Determine whether each statement is true or false....Ch. 8 - Determine whether each statement is true or false....Ch. 8 - When the value of is increased, the probability...Ch. 8 - If you wish to test the claim that the mean of the...Ch. 8 - The degrees of freedom for the chi-square test for...Ch. 8 - For the t test, one uses _______ instead of . a. n...Ch. 8 - Complete the following statements with the best...Ch. 8 - Complete the following statements with the best...Ch. 8 - A conjecture about a population parameter is...Ch. 8 - Complete the following statements with the best...Ch. 8 - Complete the following statements with the best...Ch. 8 - For the following exercises where applicable: a....Ch. 8 - For Exercises 1 through 25, perform each of the...Ch. 8 - For Exercises 1 through 25, perform each of the...Ch. 8 - Prob. 18CQCh. 8 - Prob. 19CQCh. 8 - For Exercises 1 through 25, perform each of the...Ch. 8 - Prob. 21CQCh. 8 - Prob. 22CQCh. 8 - For the following exercises where applicable: a....Ch. 8 - For the following exercises where applicable: a....Ch. 8 - For the following exercises where applicable: a....Ch. 8 - Prob. 26CQCh. 8 - Prob. 27CQCh. 8 - Find the P-value for the z test in Exercise 16....Ch. 8 - Prob. 29CQCh. 8 - Prob. 30CQCh. 8 - For the following exercises where applicable: a....Ch. 8 - Strength of Wrapping Cord A manufacturer claims...Ch. 8 - Prob. 33CQCh. 8 - Find the 95% confidence interval for the mean in...Ch. 8 - Critical Thinking Challenges The power of a test...
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