Essentials of Statistics for the Behavioral Sciences
8th Edition
ISBN: 9781133956570
Author: Frederick J Gravetter, Larry B. Wallnau
Publisher: Cengage Learning
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Chapter 8.1, Problem 1LC
The city school district is considering increasing class size in the elementary schools. However, some members of the school board are concerned that larger classes may have a negative effect on student learning. In words, what would the null hypothesis say about the effect of class size on student learning?
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In this problem, we consider a Brownian motion (W+) t≥0. We consider a stock model (St)t>0
given (under the measure P) by
d.St 0.03 St dt + 0.2 St dwt,
with So 2. We assume that the interest rate is r = 0.06. The purpose of this problem is to
price an option on this stock (which we name cubic put). This option is European-type, with
maturity 3 months (i.e. T = 0.25 years), and payoff given by
F = (8-5)+
(a) Write the Stochastic Differential Equation satisfied by (St) under the risk-neutral measure
Q. (You don't need to prove it, simply give the answer.)
(b) Give the price of a regular European put on (St) with maturity 3 months and strike K = 2.
(c) Let X =
S. Find the Stochastic Differential Equation satisfied by the process (Xt)
under the measure Q.
(d) Find an explicit expression for X₁ = S3 under measure Q.
(e) Using the results above, find the price of the cubic put option mentioned above.
(f) Is the price in (e) the same as in question (b)? (Explain why.)
Chapter 8 Solutions
Essentials of Statistics for the Behavioral Sciences
Ch. 8.1 - The city school district is considering increasing...Ch. 8.1 - Prob. 2LCCh. 8.1 - Prob. 3LCCh. 8.1 - A researcher selects a sample of n = 16...Ch. 8.1 - A small value (near zero) for the z-score...Ch. 8.1 - Prob. 3LCACh. 8.2 - Prob. 1LCCh. 8.2 - Prob. 2LCCh. 8.2 - Prob. 3LCCh. 8.2 - Prob. 4LC
Ch. 8.2 - If a sample mean is in the critical region with =...Ch. 8.3 - Prob. 1LCCh. 8.3 - In a research report, the term significant is used...Ch. 8.3 - Prob. 3LCCh. 8.3 - Prob. 4LCCh. 8.3 - Prob. 5LCCh. 8.4 - A researcher selects a sample from a population...Ch. 8.4 - Prob. 2LCCh. 8.4 - A researcher obtains z = 2.43 for a hypothesis...Ch. 8.5 - Prob. 1LCCh. 8.5 - A researcher selects a sample from a population...Ch. 8.5 - Prob. 3LCCh. 8.6 - Prob. 1LCCh. 8.6 - For a 5-point treatment effect, a researcher...Ch. 8.6 - Prob. 3LCCh. 8.6 - Prob. 4LCCh. 8 - The value of the z-score in a hypothesis test is...Ch. 8 - Define the alpha level and the critical region,...Ch. 8 - Although there is a popular belief that herbal...Ch. 8 - Childhood participation in sports, cultural...Ch. 8 - A local college requires an English composition...Ch. 8 - A random simple is selected from a normal...Ch. 8 - A random sample of n = 25 scores is selected from...Ch. 8 - Brunt, Rhee, and Zhong (2008) surveyed 557...Ch. 8 - A random simple is selected from a normal...Ch. 8 - In a study examining the effect of alcohol on...Ch. 8 - The researchers cited in the previous problem...Ch. 8 - There is some evidence indicating that people with...Ch. 8 - Researchers at a National Weather Center in the...Ch. 8 - Montarello and Martens (2005) found that...Ch. 8 - Researchers hate noted a decline in cognitive...Ch. 8 - A researcher plans to conduct an experiment...Ch. 8 - A sample of n = 40 is selected from a normal...Ch. 8 - Briefly explain how increasing sample size...Ch. 8 - Explain how the power of a hypothesis test is...Ch. 8 - A researcher is investigating the effectiveness of...Ch. 8 - A researcher is evaluating the influence of a...Ch. 8 - Find each of the requested values for a population...Ch. 8 - A survey of high school seniors shows that the...Ch. 8 - Miller (2008) examined the energy drink...
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