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

3 years ago

A sample is BEST defined as _________.

Thepotemich [5.8K]

Answer:

(B) A selected group of participants that is representative of a larger population

Step-by-step explanation:

A sample statistic is a piece of information that you get from a fraction of the population. This information is representative of a larger population.

For example, someone wants to conduct a survey about the most popular NFL team in Syracuse, NY, if it is the Buffalo Bills or the New York Giants. This person is not going to ask each person for whom they cheer. They are going to collect data from a fraction of the population and this data will be expanded to include the entire population.

So, the correct answer is:

(B) A selected group of participants that is representative of a larger population

7 0

3 years ago

The perimeter of a rectangle is 50 feet and its area is 154 feet. What are the dimensions of the

sasho [114]

14 and 11 are it dimensions

Hope this helps!

3 0

3 years ago