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

The gas tank of a 2013 Honda Accord holds 17.2 gallons. How many pounds of carbon dioxide are produced by burning an entire tank

cricket20 [7]

One gallon of gasoline (6.3 lbs.) produces about 20 lbs. of carbon dioxide. This may seem weird and untrue, however, most of that weight comes from the oxygen in the air. Following the math on this means that we multiply 17.2 gallons of gas by 20 lbs. of co2 per gallon of gas burned.
This gives us the answer of 344 lbs. of carbon dioxide burned per tank of gas. (From a 2013 Honda Accord)

8 0

3 years ago