Questions from Business Statistics

Q: Using the notation in this chapter, prove that a 95%

Using the notation in this chapter, prove that a 95% confidence interval for ST is between /

Q: The notes accompanying a company’s financial statements say: ‘‘Our executive

The notes accompanying a company’s financial statements say: ‘‘Our executive stock options last 10 years and vest after 4 years. We valued the options granted this year using the Black–Scholes–Merton...

Q: The one-year forward price of the Mexican peso is $

The one-year forward price of the Mexican peso is $0.0750 per MXN. The U.S. risk-free rate is 1.25% and the Mexican risk-free rate is 4.5%. The exchange rate volatility is 13%. What are the values of...

Q: In a Dutch auction of 10,000 options, bids are

In a Dutch auction of 10,000 options, bids are as follows: A bids $30 for 3,000; B bids $33 for 2,500; C bids $29 for 5,000; D bids $40 for 1,000; E bids $22 for 8,000; and F bids $35 for 6,000. What...

Q: A company has granted 500,000 options to its executives.

A company has granted 500,000 options to its executives. The stock price and strike price are both $40. The options last for 12 years and vest after 4 years. The company decides to value the options u...

Q: Explain why employee stock options on a non-dividend-paying

Explain why employee stock options on a non-dividend-paying stock are frequently exercised before the end of their lives, whereas an exchange-traded call option on such a stock is never exercised earl...

Q: Consider a stock index currently standing at 250. The dividend yield

Consider a stock index currently standing at 250. The dividend yield on the index is 4% per annum, and the risk-free rate is 6% per annum. A three-month European call option on the index with a strike...

Q: An index currently stands at 696 and has a volatility of 30

An index currently stands at 696 and has a volatility of 30% per annum. The risk-free rate of interest is 7% per annum and the index provides a dividend yield of 4% per annum. Calculate the value of a...

Q: An index currently stands at 1,500. European call and

An index currently stands at 1,500. European call and put options with a strike price of 1,400 and time to maturity of six months have market prices of 154.00 and 34.25, respectively. The six-month ri...

Q: A total return index tracks the return, including dividends, on

A total return index tracks the return, including dividends, on a certain portfolio. Explain how you would value (a) forward contracts and (b) European options on the index.