On Sept 30th, 2011, Exxon Mobil (XOM) stock was traded at $72.63 while the December XOM put option with $75 exercise price is traded at $5.00 and the December XOM call option with $70 exercise price is traded at $5.60. The put option's delta is -0.65 and the call option's delta is 0.7.
A) On October 3rd, XOM stock price changed to $71.15 on Oct 3rd, what will be the values of the put and call options?
B) Consider a portfolio composed of:
1,005 XOM stocks
20 Dec XOM Call options
37 Dec XOM Put options
What is the portfolio position delta?
C) Using the portfolio position delta, calculate the portfolio value before AND after the stock price change.
| A) | new Call option premium? |
| new Put option premium? | |
| B) | Position delta? |
| C) | Portfolio value before the change? |
| Portfolio value after the change? |
In: Finance
The longest "run" of S's in the sequence SSFSSSSFFS has length 4, corresponding to the S's on the fourth, fifth, sixth, and seventh positions. Consider a binomial experiment with n = 4, and let ybe the length (number of trials) in the longest run of S's. (Round your answers to four decimal places.)
(a) When p = 0.5, the 16 possible outcomes are equally likely. Determine the probability distribution of y in this case (first list all outcomes and the y value for each one).
| y | p(y) |
|---|---|
| 0 | |
| 1 | |
| 2 | |
| 3 | |
| 4 |
Calculate μy.
μy =
(b) Repeat Part (a) for the case p = 0.7.
| y | p(y) |
|---|---|
| 0 | |
| 1 | |
| 2 | |
| 3 | |
| 4 |
Calculate μy.
μy =
(c) Let z denote the longest run of either S's or
F's. Determine the probability distribution of z
when p = 0.5.
| z | p(z) |
|---|---|
| 1 | |
| 2 | |
| 3 | |
| 4 |
In: Statistics and Probability
A syrup company sells pure maple syrup in 16-ounce bottles. As part of the company’s quality control program, random sampling is done weekly. If too little syrup is put in each bottle, customers will be dissatisfied, and if too much syrup is put in each bottle, the company will lose money. In either case, the equipment would be turned off to investigate the problem further. Testing is conducted using a 5% significance level. (a) State the appropriate hypotheses. (b) What assumptions are required to perform the test stated in part (a)? (c) How would a Type I error affect the company? (d) How would a Type II error affect the company? (e) The week’s sample of 20 bottles had a mean of 15.8 ounces and a standard deviation of 0.7 ounces. Perform the test, and report the associated p-value. (f) Based on the data and res ults of the test, what would be your recommendation?
In: Statistics and Probability
Super Bikes (SB) Inc. is a company which manufactures bicycles and distributes to retailers across Canada. Its line of business is generally considered quite stable and low risk. SB Inc. would like to invest in a new division to manufacture skateboards.
Currently, SB Inc. has a cost of debt (before tax) of 5% and its stock has a beta of 0.6. The firm’s debt-equity ratio is 0.7. The firm has identified another company (Free Wheels Inc) whose main business is similar to this project. Free Wheels Inc. has a cost of debt (before tax) of 8%, a beta of 2.5, tax rate of 35% and a debt-equity ratio of 0.4.
SB Inc.has an effective tax rate of 35%. The expected return on the market is 10% and the risk free rate of interest is 4%.
What is the appropriate cost of capital to apply to SB Inc.’s proposed expansion into the skateboard manufacturing business?
In: Finance
Q No. 3: a. An investor in Canada purchased 100 shares of IBM on January 1st at $93.00/share. IBM paid an annual dividend of $0.72 on December 31st. The stock was sold that day as well for $100.25. The exchange rate is $0.68/Canadian dollar on January 1st and $0.7 1/Canadian dollar on December 31st.
What is the investor’s total return in Canadian dollars?
b. The British pound to U.S. dollar exchange rate is 1.36 and the New Zealand dollar to U.S. dollar exchange rate is 0.62. If you find that the British pound to New Zealand dollar is trading at 0.49, what would you do to earn a riskless profit?
c. The Mexican peso is trading at 10 pesos per dollar. If the expected U.S. Inflation rate is 23% while the Mexican inflation rate is 2% over the next year,
what is the expected exchange rate in one year?
Corporate Finance is subject
In: Finance
With a previous contractor, the mean time to repair a pothole was 3.2 days. A city councilman thinks that the new contractor’s mean time to repair a pothole is higher than 3.2 days. He randomly selects a sample of 12 pothole service calls and obtains the following times to repair (in days):
6.2 4.3 7.1 2.9 5.4 3.7 5.5 0.7 7.5 5.6 2.6 1.7
Is there enough evidence to support the councilman’s claim? (use alpha = 0.05 level of significance)
Assume all conditions are satisfied for your chosen hypothesis test.
Show all the steps of an appropriate hypothesis test, including finding the P-value. (can I get an explanation for each step please A,B,C,D,E,F)
A.) What are the null and alternate hypotheses?
B.) What is the decision Rule?
C.)What is the test statistic?
D.) What is the decision?
E.) What does the decision infer?
F.) What is the estimated P-Value?
In: Statistics and Probability
1. What do we mean by the direction of the linear relationship between two variables?
Group of answer choices
Direction is used to describe possible directions when arrows are placed on the points
Direction is used to describe if the points are pointing North or South
Direction is used to describe if the points are pointing east or west
Direction describes if the points are rising or falling as you go from left to right
2. Describe the strength and direction of the linear relationship between two variables in which the value of r is between 0.7 and 1
Group of answer choices
strong and moderate
strong and positive
strong and negative
weak and positive
3. True or False: when two variables are strongly correlated, the independent variable causes the dependent variable to behave as observed
Group of answer choices
true
false
4. The regression line can be used to predict the value of the independent variable (x).
Group of answer choices
False
True
In: Statistics and Probability
The grade point averages (GPAs) of a large population of college students are approximately normally distributed with mean 2.5 and standard deviation 0.7. If students possessing a GPA less than 1.75 are dropped from college, what percentage of the students will be dropped? (Round your answer to two decimal places.)
?? %
The width of bolts of fabric is normally distributed with mean 950 mm (millimeters) and standard deviation 10 mm.
(a) What is the probability that a randomly chosen bolt has a width between 943 and 959 mm? (Round your answer to four decimal places.)
What is the probability that a randomly chosen bolt has a width between 943 and 959 mm? (Round your answer to four decimal places.)
(b)
What is the appropriate value for C such that a randomly chosen bolt has a width less than C with probability 0.8749? (Round your answer to two decimal places.)
C =
In: Statistics and Probability
Statistic
Q3(a) To estimate the mean amount of time children spend in physical activities daily, a researcher randomly selects 8 children and records the number of hours they spend in physical activities in one day. The numbers of hours are: 4.1, 1.2, 4.6, 2.4, 3.2, 1.8, 2.4, and 0.7. Obtain a 95% confidence interval of the mean number of hours that children spend in physical activities.
Q3(b) It is found that the average lifespan of 100 smart phones is 23.5 months with a standard deviation of 10.2 months. Construct the 99% confidence interval for the mean lifespan of all smart phones. State the assumption(s) made.
Q3(c) A machine produces DVD discs. The diameters of these DVD discs vary, and the standard deviation is 0.01 centimeter. How large a sample should be taken if we wish to have 95% confidence that our sample mean will not differ from the true mean by more than 0.001 centimeter?
In: Statistics and Probability
Disadvantage groups, notably Blacks and Hispanics. Have had smaller high school graduation rates and so less access to college than Whites. Among those with college degrees is an educational success beyond college similarly affected? To address this question use the data below. sample of 30-year-old Americans with college degrees.
Highest Degree. Whites Black Hispanic Row Totals
College 5030 549 412 5991
Advanced 1324 117 99 1540
Columm totals 6354 668 511 7634 (grand)
a) state appropriate hypotheses
b) Find the degree of freedom
Compute the expected values for the entries for Hispanics. Compute the corresponding contributions to x2. To save time here are the contributions of x2 from the cells of white and blacks: 0.12, 0.7, 0.47, and 2.70.
d) conduct the appropriate test and give (an estimate of) p-value.
e) give an appropriate conclusion in statistical and everyday language.
In: Statistics and Probability