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Contracts

Conceptual and Computational Questions

1. Identify whether each of the following transactions involves spot exchange, contract, or vertical integration. a. Barnacle, Inc., has a legal obligation to purchase 2 tons of structural steel per week to manufacture conveyor frames. b. Exxon-Mobil uses the oil extracted from its wells to produce raw polypropylene, a type of

Airline Industry

Please assist me with a 400 to 450 word essay that will provide a brief history of the airline industry, plus an industry overview, and a SWOTT analysis of the airline industry. Please include references.

Forward Premium Problem

The Wall Street Journal reported the following spot and forward rates for the Swiss franc ($/SF) Spot $0.8202 30 day forward $0.8244 90 day forward $0.8295 180 day forward $0.8343 a) Was the Swiss franc selling at a discount or premium in the forward market? b) What was the 30-day forward premium (or discount)?

Covered Interest Arbitrage & Purchasing Power Parity

Congratulations, you just won the Irish Lottery! You bought a ticket while you were on vacation in Ireland, and your winnings amount to 1 million (euros) after all taxes were deducted. 1. If the current exchange rate is US$1 equals .70, how much did you win in US dollars? 2. Suppose that the interest rate in Irish banks i

Hedging commodities and exchange rate

Please help me figure out the following hedging problems. Problem 1: Hedging Commodities Bubbling Crude Corporation, a large Texas oil producer, would like to hedge against adverse movement in the price of oil because this is the firm's primary source of revenue. What should the firm do? Provide at least two reasons why it

Market Structure: Perfect Competition

Office building maintenance plans call for the stripping, waxing, and buffing of ceramic floor tiles. This work is often contracted out to office maintenance firms, and both technology and labor requirements are very basic. Supply and demand conditions in this perfectly competitive service market in New York are: Supply:

What position should the fund manager take to hedge exposure to the market over the next two months? Calculate the effect of your strategy on the fund manager's returns if the index in two months is 700, 800, 900, 1,000 and 1,100.

A fund manager has a portfolio worth $100 million with a beta of 1.20. The manager is concerned about the performance of the market over the next two months and plans to use three-month futures contracts on the S&P 500 to hedge the risk. The current index level is 850 and one futures contract is on 250 times the index (i.e., the

Determining Profitable Option Strategy: Example Problem

The current price of a stock is $94, and three-month European call options with a strike price of $95 currently sell for $4.70. An investor who feels that the price of the stock will increase is trying to decide between buying 100 shares and buying 2,000 call options (20 contracts). Both strategies involve an investment of $9,40

Futures and Options Problem

The price of gold is currently $700 per ounce. Forward contracts are available to buy or sell gold at $900 for delivery in one year. An arbitrageur can borrow money at 10% per annum. What should the arbitrageur do? Assume that the cost of storing gold is zero and that gold provides no income.

Buying a home vs renting

The real estate agent tells the Bergholts that if they don't care to purchase, they might consider renting. The rental option would cost $1,400/month plus utilities estimated at $220 and renter's insurance of $25/month. The Bergholts believe that neither of them is likely to be transferred to another location within the next fiv

QUESTIONS AND ANSWER

Your local city is trying to attract a new NASCAR race track. As part of the package of incentives for luring the facility's builders, the city is offering an economic subsidy of $500,000 to help build the track. You are writing a letter to the editor of your local paper either supporting or criticizing the proposed $500,000 sub

boycotting French products

Dilomatic tensions over the war with Iraq and patriotic fervor led the state legislature in South Carolina to initiate a resolution boycotting French products. But before the resolution could become law, South Carolina lawmakers abruptly changed their minds and never followed up on the measure. Can you explain the unexpecte

Wal-Mart Cost Structure

Prepare a 350-word paper analyzing the CURRENT Cost Structure( (1.) Wages and benefits (2.) Fixed and variable Cost) of Wal-Mart:

Edgeworth Box problem

Suppose that two individuals have the same tastes and the same initial endowments. What can you say about the efficiency of the allocation which corresponds to the initial endowment? By way of explanation, illustrate using an Edgeworth box to show what is going on.

Which process is the best choice?

The firm has $150,000 to invest in the spot, forward, or options markets. The spot rate is $1.2622 to the euro, and in 12 months, the forward rate is $1.2905 to the euro. However, this leader is sure that the exchange rate in 12 months will be $1.33 to the euro. Explain how she can speculate on the belief that the euro wil

Futures contract positions

Can you please explain how purchasers of financial futures contracts can offset their position, and how is their gain or loss determined? What is the maximum loss to a purchaser of a futures contract?

How would you advise the company to handle the repatriation?

Scenario: Primetime Systems, Inc. now has total worldwide revenues of over $820 million forecast for this coming year. You have operations in the United States of $450 million with a 12% ROS (return on sales), operations in Germany of ?200 million with an a return on sales (ROS) of 11%, and operations in Shanghai,

Saving Species

Please answer the 5 questions below: Saving Species There is a dilemma in wildlife-habitat management: is the correct course to keep timber cutting to an absolute minimum thereby saving all the endangered creatures, or to allow some cutting with the result that a few of the species are sacrificed? The increasingly co

Preventing Reduce in Workload: Employee Control

Suppose you plan to quit your job in 6 weeks because you have saved enough money to move to California where you can indulge your interest in rock climbing. How can your supervisor keep you from shirking your duties during your last weeks at work?

Finance: Loan Scenarios: Midland Chemical Co.

Midland Chemical Co. is negotiating a loan from Manhattan Bank and Trust. Thesmall chemical company needs to borrow $500,000.The bank offers a rate of 8¼ percent with a 20 percent compensating balancerequirement, or as an alternative, 9¾ percent with additional fees of $5,500 to coverservices the bank is providing. In either c

Who Should Draft a Union Contract in Game Theory?

The UAW labor contract with General Dynamics expired in October 2001. In the months preceding the expiration date, bargaining teams for the UAW and General Dynamics met to negotiate a new contract. All contracts must be ratified by the union members. Some of the many issues on the table included job security, health benefits,

Production cost functions

1.The chief economist for Argus Corporation, a large appliance manufacturer, estimated the firm's short-run cost function for vacuum cleaners using an average variable cost function of the form. AVC= a + bQ+ cQ^2 (the 2 is suppose to be exponent) Where AVC=dollars per vacuum cleaner and Q=number of vacuum cleaners produced e

Calculating Worth of a contract and Perpetuity

The Publicity agents for the Winterpeg Blue Strikers announce the signing of a quarterback, Shane Doe. They say that the contract is worth CAD 1 million and will be paid in 20 installments of $50000 per year starting one year from now and with one new installment each year for the next twenty years. The contract contains a claus

Futures and Options

Present equations in words 1. Look at the option quotes: Option trading prices a. What is the closing price of the common stock of SINGLE Systems? b. What is the highest strike price listed? c. What is the price of a December 20 call option? d. What is the price of a January 22.50 put option? 2. Assume a stock is se

Profit Maximization in perfectly competitive environment

Assume the following cost data are for a purely competitive producer: a. At a product price of $56, will this firm produce in the short run? Why or why not? If it is preferable to produce, what will be the profit-maximizing or loss minimizing output? Explain. What economic profit or loss will the firm realize per unit of outp

Economics

Select a country other than one in North America.Prepare a 775 word paper in which you compare and contrast marketing in your selected country and in the United States. In your comparison, be sure to analyze the marketing environments of each country including, but not limited to cultural, political, legal, and economic influenc

International Economics

1. Implication of IRP. Assume that interest rate parity exists. You expect that the one-year nominal interest rate in the U.S. is 7%, while the one-year nominal interest rate in Australia is 11%. The spot rate of the Australian dollar is $.60. You will need 10 million Australian dollars in one year. Today, you purchase a one-yea