An option to buy a stock is priced at $150. If the stock closes above 30 next Thursday, the option will be worth $1000. If it closes below 20, the option will be worth nothing, and if it closes between 20 and 30, the option will be worth $200. A trader thinks there is a 50% chance that the stock will close in the 20-30 range, a 20% chance that it will close above 30, and a 30% chance that it will fall below 20.

a) Let X represent the price of the option

$1000 20/100 = 0.2

$200 50/100 = 0.5

$0 30/100 = 0.3

b) Expected option price

$= \sum x.P(X=x)\\\\ = 1000 * 0.2 + 200 * 0.5 + 0 = \$ 300$

Therefore expected gain = $300 - $150 = $150

c) The trader should buy the stock. Since there is an positive expected gain($150) in trading that stock option.

7 0

4 years ago

A carton measuring 72 cm by 48 cm by 75 cm was packed with cyndrical tins of radius 6 cm and height 15 cm standing upright.How m

Ierofanga [76]

Answer:

milk

Step-by-step explanation:

7 0

3 years ago

A region R in the xy-plane is given. Find equations for a transformation T that maps a rectangular region S in the uv-plane onto

ruslelena [56]

X(u, v) = (2(v - c) / (d - c) + 1)cos(pi * (u - a) / (2b - 2a))
y(u, v) = (2(v - c) / (d - c) + 1)sin(pi * (u - a) / (2b - 2a))

As v ranges from c to d, 2(v - c) / (d - c) + 1 will range from 1 to 3, which is the perfect range for the radius. As u ranges from a to b, pi * (u - a) / (2b - 2a) will range from 0 to pi/2, which is the perfect range for the angle. So, this maps the rectangle to R.

6 0

3 years ago