APPLIED STAT.IN BUS.+ECONOMICS
6th Edition
ISBN: 9781259957598
Author: DOANE
Publisher: RENT MCG
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Chapter 9.8, Problem 64SE
To determine
Check whether the sample variance is either too high or too low.
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Question 1: Determine and interpret the correlation coefficient between the two variables. In your interpretation, discuss the direction of the relationship (positive, negative, or zero relationship). Also discuss the strength of the relationship.
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Direction of the relationship (positive, negative, or zero relationship):
Strength of the relationship (strong/moderate/weak):
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Chapter 9 Solutions
APPLIED STAT.IN BUS.+ECONOMICS
Ch. 9.2 - If you repealed a hypothesis test 1,000 times (in...Ch. 9.2 - Define Type I and Type II errors for each...Ch. 9.2 - A firm decides to test its employees for illegal...Ch. 9.2 - A hotel installs smoke detectors with adjustable...Ch. 9.2 - What is the consequence of a false negative in an...Ch. 9.2 - Prob. 6SECh. 9.3 - A manufacturer claims that its compact fluorescent...Ch. 9.3 - Prob. 8SECh. 9.3 - Prob. 9SECh. 9.3 - The average age of a part-time seasonal employee...
Ch. 9.3 - Prob. 11SECh. 9.3 - Prob. 12SECh. 9.4 - Find the zcalc test statistic for each hypothesis...Ch. 9.4 - Prob. 14SECh. 9.4 - Prob. 15SECh. 9.4 - Prob. 16SECh. 9.4 - Green Beam Ltd. claims that its compact...Ch. 9.4 - The mean potassium content of a popular sports...Ch. 9.4 - Calculate the test statistic and p-value for each...Ch. 9.4 - Determine the p-value for each test statistic. a....Ch. 9.4 - Procyon Mfg. produces tennis balls. Weights are...Ch. 9.4 - The mean arrival rate of flights at OHare Airport...Ch. 9.4 - Prob. 23SECh. 9.4 - The Scottsdale fire department aims to respond to...Ch. 9.4 - The lifespan of xenon metal halide arc-discharge...Ch. 9.4 - Discuss the issues of statistical significance and...Ch. 9.4 - The target activation force of the buttons on a...Ch. 9.5 - Find the tcalc test statistic for each hypothesis...Ch. 9.5 - Find the critical value of Students t for each...Ch. 9.5 - Find the critical value of Students t for each...Ch. 9.5 - Find the tcalc test statistic for each hypothesis...Ch. 9.5 - Estimate the p-value as a range using Appendix D...Ch. 9.5 - Prob. 33SECh. 9.5 - Prob. 34SECh. 9.5 - Prob. 35SECh. 9.5 - The manufacturer of an airport baggage scanning...Ch. 9.5 - Prob. 37SECh. 9.5 - The average weight of a package of rolled oats is...Ch. 9.5 - Prob. 39SECh. 9.5 - Prob. 40SECh. 9.5 - Prob. 41SECh. 9.5 - Prob. 42SECh. 9.5 - Prob. 43SECh. 9.6 - Interpret each p-value in your own words: a....Ch. 9.6 - Prob. 45SECh. 9.6 - Prob. 46SECh. 9.6 - May normality of the sample proportion p be...Ch. 9.6 - Prob. 48SECh. 9.6 - In a hospitals shipment of 3,500 insulin syringes,...Ch. 9.6 - Prob. 50SECh. 9.6 - Prob. 51SECh. 9.6 - The recent default rate on all student loans is...Ch. 9.6 - Prob. 53SECh. 9.6 - A Realtor claims that no more than half of the...Ch. 9.6 - BriteScreen, a manufacturer of 19-inch LCD...Ch. 9.6 - Perfect pitch is the ability to identify musical...Ch. 9.7 - A quality expert insects 400 items to test whether...Ch. 9.7 - Prob. 58SECh. 9.7 - For a certain wine, the mean pH (a measure of...Ch. 9.7 - Repeat the previous exercise, using = .05. For...Ch. 9.8 - A sample of size n = 15 has variance s2 = .35. At ...Ch. 9.8 - Prob. 62SECh. 9.8 - A sample of size n = 19 has variance s2 = .1.96....Ch. 9.8 - Prob. 64SECh. 9.8 - Prob. 65SECh. 9 - (a) List the steps in testing a hypothesis, (b)...Ch. 9 - (a) Explain the difference between the null...Ch. 9 - (a) Why do we say fail to reject H0 instead of...Ch. 9 - (a) Define Type I error and Type II error. (b)...Ch. 9 - (a) Explain the difference between a left-tailed...Ch. 9 - Prob. 6CRCh. 9 - Prob. 7CRCh. 9 - (a) Why do we prefer low values for and ? (b) For...Ch. 9 - Prob. 10CRCh. 9 - Prob. 11CRCh. 9 - (a) Explain what a p-value means. Give an example...Ch. 9 - Prob. 13CRCh. 9 - (a) What does a power curve show? (b) What factors...Ch. 9 - (a) In testing a hypothesis about a variance, what...Ch. 9 - Suppose you always reject the null hypothesis,...Ch. 9 - Suppose the judge decides to acquit all...Ch. 9 - High blood pressure, if untreated, can lead to...Ch. 9 - A nuclear power plant replaces its ID card...Ch. 9 - A test-preparation company advertises that its...Ch. 9 - Prob. 71CECh. 9 - Prob. 72CECh. 9 - Prob. 73CECh. 9 - Pap smears are a test for abnormal cancerous and...Ch. 9 - Prob. 75CECh. 9 - Prob. 76CECh. 9 - Malcheon Health Clinic claims that the average...Ch. 9 - The sodium content of a popular sports drink is...Ch. 9 - A can of peeled whole tomatoes is supposed to...Ch. 9 - At Ajax Spring Water, a half-liter bottle of soft...Ch. 9 - Prob. 81CECh. 9 - Prob. 82CECh. 9 - A U.S. dime weighs 2.268 grams when minted. A...Ch. 9 - A coin was flipped 60 times and came up heads 38...Ch. 9 - Prob. 85CECh. 9 - Prob. 86CECh. 9 - Prob. 87CECh. 9 - Prob. 88CECh. 9 - Prob. 89CECh. 9 - Prob. 90CECh. 9 - Prob. 91CECh. 9 - Prob. 92CECh. 9 - The average service time at a Noodles Company...Ch. 9 - Prob. 94CECh. 9 - Prob. 95CECh. 9 - Beer shelf life is a problem for brewers and...Ch. 9 - Prob. 97CECh. 9 - Prob. 99CECh. 9 - Prob. 100CECh. 9 - Prob. 101CECh. 9 - Prob. 102CECh. 9 - An experimental medication is administered to 16...Ch. 9 - The historical on-time percentage for Amtraks...Ch. 9 - After 7 months, none of 238 angioplasty patients...Ch. 9 - A certain brand of flat white interior latex paint...Ch. 9 - Prob. 107CECh. 9 - Prob. 108CECh. 9 - Prob. 109CE
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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.)arrow_forwardProblem 4. Margrabe formula and the Greeks (20 pts) In the homework, we determined the Margrabe formula for the price of an option allowing you to swap an x-stock for a y-stock at time T. For stocks with initial values xo, yo, common volatility σ and correlation p, the formula was given by Fo=yo (d+)-x0Þ(d_), where In (±² Ꭲ d+ õ√T and σ = σ√√√2(1 - p). дго (a) We want to determine a "Greek" for ỡ on the option: find a formula for θα (b) Is дго θα positive or negative? (c) We consider a situation in which the correlation p between the two stocks increases: what can you say about the price Fo? (d) Assume that yo< xo and p = 1. What is the price of the option?arrow_forwardWe consider a 4-dimensional stock price model given (under P) by dẴ₁ = µ· Xt dt + йt · ΣdŴt where (W) is an n-dimensional Brownian motion, π = (0.02, 0.01, -0.02, 0.05), 0.2 0 0 0 0.3 0.4 0 0 Σ= -0.1 -4a За 0 0.2 0.4 -0.1 0.2) and a E R. We assume that ☑0 = (1, 1, 1, 1) and that the interest rate on the market is r = 0.02. (a) Give a condition on a that would make stock #3 be the one with largest volatility. (b) Find the diversification coefficient for this portfolio as a function of a. (c) Determine the maximum diversification coefficient d that you could reach by varying the value of a? 2arrow_forward
- Question 1. Your manager asks you to explain why the Black-Scholes model may be inappro- priate for pricing options in practice. Give one reason that would substantiate this claim? Question 2. We consider stock #1 and stock #2 in the model of Problem 2. Your manager asks you to pick only one of them to invest in based on the model provided. Which one do you choose and why ? Question 3. Let (St) to be an asset modeled by the Black-Scholes SDE. Let Ft be the price at time t of a European put with maturity T and strike price K. Then, the discounted option price process (ert Ft) t20 is a martingale. True or False? (Explain your answer.) Question 4. You are considering pricing an American put option using a Black-Scholes model for the underlying stock. An explicit formula for the price doesn't exist. In just a few words (no more than 2 sentences), explain how you would proceed to price it. Question 5. We model a short rate with a Ho-Lee model drt = ln(1+t) dt +2dWt. Then the interest rate…arrow_forwardIn 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.)arrow_forwardThe managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c. Question content area bottom Part 1 a. Develop a simple linear regression model between billable hours and overhead costs. Overhead Costsequals=212495.2212495.2plus+left parenthesis 42.4857 right parenthesis42.485742.4857times×Billable Hours (Round the constant to one decimal place as needed. Round the coefficient to four decimal places as needed. Do not include the $ symbol in your answers.) Part 2 b. Interpret the coefficients of your regression model. Specifically, what does the fixed component of the model mean to the consulting firm? Interpret the fixed term, b 0b0, if appropriate. Choose the correct answer below. A. The value of b 0b0 is the predicted billable hours for an overhead cost of 0 dollars. B. It is not appropriate to interpret b 0b0, because its value…arrow_forward
- Using the accompanying Home Market Value data and associated regression line, Market ValueMarket Valueequals=$28,416+$37.066×Square Feet, compute the errors associated with each observation using the formula e Subscript ieiequals=Upper Y Subscript iYiminus−ModifyingAbove Upper Y with caret Subscript iYi and construct a frequency distribution and histogram. LOADING... Click the icon to view the Home Market Value data. Question content area bottom Part 1 Construct a frequency distribution of the errors, e Subscript iei. (Type whole numbers.) Error Frequency minus−15 comma 00015,000less than< e Subscript iei less than or equals≤minus−10 comma 00010,000 0 minus−10 comma 00010,000less than< e Subscript iei less than or equals≤minus−50005000 5 minus−50005000less than< e Subscript iei less than or equals≤0 21 0less than< e Subscript iei less than or equals≤50005000 9…arrow_forwardThe managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c Overhead Costs Billable Hours345000 3000385000 4000410000 5000462000 6000530000 7000545000 8000arrow_forwardUsing the accompanying Home Market Value data and associated regression line, Market ValueMarket Valueequals=$28,416plus+$37.066×Square Feet, compute the errors associated with each observation using the formula e Subscript ieiequals=Upper Y Subscript iYiminus−ModifyingAbove Upper Y with caret Subscript iYi and construct a frequency distribution and histogram. Square Feet Market Value1813 911001916 1043001842 934001814 909001836 1020002030 1085001731 877001852 960001793 893001665 884001852 1009001619 967001690 876002370 1139002373 1131001666 875002122 1161001619 946001729 863001667 871001522 833001484 798001589 814001600 871001484 825001483 787001522 877001703 942001485 820001468 881001519 882001518 885001483 765001522 844001668 909001587 810001782 912001483 812001519 1007001522 872001684 966001581 86200arrow_forward
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