Scenario: You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months time.
a. If the stock is trading at $55 in three months, what will be the payoff of the call?
b. If the stock is trading at $35 in three months, what will be the payoff of the call?
Please help with the following problem.
Tea Time is considering selling juices along with its other products.
States of Nature
High Sales Med. Sales Low Sales
A(0.2) B(0.5) C(0.3)
3000 2000 -6000
0 0 0
Two bookstores are competing for customers. Both bookstores can decide to offer discounts to attract more customers. Bookstore-A has a 30% probability of offering a discount. The probability that Bookstore-B will offer a discount is unknown, and is represented by P. The payoffs for the bookstores depending on whether discounts a
Zymase is a biotechnology start-up firm. Researchers at Zymase must choose one of three different research strategies. The payoffs (after-tax) and their likelihood for each strategy are show below. The risk of each project is diversifiable.
Strategy Probability Pay-off (million)
A 100% 75
Below is a payoff matrix for Intel and AMD. In each cell, the first number refers to AMD's profit, while the second is Intel's.
a. Is there a Nash Equilibrium(s)? Why or why not?
b. Is this an example of the Prisoner's Dilemma? Why or why not?
AMD Lower Price Same Price Higher Price
C1 C2 C3
R1 3,2 2,1 1,a
R2 2,2 b,4 0,2
R3 c,d 3,2 e,4
a) Give a condition on b such that R2 is strictly dominated by R1.
b) Given that a) holds, find a condition on d such that C1 strictly dominates C2.
c) Given that a) and b) hold, find conditions on a and c such that (R1, C1) is a Nash
Below is a payoff matrix for Intel and AMD for PC microprocessors. The first number per cell is AMD's profit while the second is Intel's.
Lower Price Same Price Higher Price
AMD Lower Price -15,-15 2,6
Suppose you make a $2,000 investment in a risky venture. There is a 60% chance that the payoff from the investment will be $5,000, a 15% chance that you will just get your money back, and a 25% chance that you will receive nothing at all from your investment.
a. Find the expected value of the payoff from your investment of $2