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Capital Budgeting/Derivative Security

1. ? What is (Microsoft) reported retained earnings? How much is 10 percent of the company's retained earnings worth? ? Assume the company is considering using an amount equal to 10 percent of its retained earnings to invest in one of the two mutually exclusive projects: 1) The first project will generate cash flows o

Theory of Purchasing Power Parity: Exchange and Interest Rates, USD vs Euros

Congratulations, you just won the Irish Lottery! You bought a ticket while you were on vacation in Ireland, and you just won a 1 million Euro jackpot after all taxes were taken out. 1. If the current exchange rate is US$1 equals 1.25 Euros, how much did you win in US dollars? 2. Suppose that the interest rate in Irish banks

Questions Regarding Starbucks

- Prices and Price elasticity of demand. - Supply and demand analysis. - Productivity and Cost structure. - Competitors and impact of new companies entering the market. - Market structure. - Group of final recommendations on price and production. Again, I am looking for guides on how to tackle the above problems (wh

Financial Economics: Put and Call Options, Future

5. You note that Sony stock is selling at $25. Each month, it either goes up 10% or down 8%. The interest rate is 1% per month. a. What is the value of a two-month call option to buy Sony at $26? b. What is the value of a two-month put option with an exercise price of $26? 6. You note that platinum sells for $750 pe

Options, Black-Scholes, Implied Volatility, Futures

Please see the attached file. 1. This problem requires you to use the Black-Scholes formula. A call option with X=$50 on a stock currently priced at S=$55 is selling for $10. Using a volatility estimate of sigma = .30, you find that N(d1) = .6 and N(d2) = .5. The risk free rate is zero. Is the implied volatility based on the op

Economics Multiple Choice Questions

If supply decreases along a given demand curve, a. an excess quantity demanded will be created, increasing the equilibrium price and causing equilibrium quantity to fall b. an excess quantity supplied will be created, lowering the equilibrium price and causing equilibrium quantity to rise c. an excess quantity demanded will b

Total Costs Determinations

Smith can operate his saw mill with or without soundproofing. Operation without soundproofing results in noise damage to his neighbor Jones. The relevant gains and loses for Smith and Jones are listed in the table: Without soundproofing With soundproofing Gains to Smith...........................$15

Analysis of a sequential decision problem with decision tree

Need help with analysis of a sequential decision problem with decision tree; Need to draw a decision tree for all possibilities. Mr. Warren operated a real estate agency that specialized in finding buyers for commercial properties. Warren was approached one day by a prospective client, who had three properties that he wi

Economic Concepts Questions

31. What is implied when the total cost of producing Q1 and Q2 together is less than the total cost of producing Q1 and Q2 separately? a) Economies of scale. b) Diminishing average fixed costs. c) Diseconomies of scale. d) Economies of scope. 32. The minimum average cost of producing alternate levels of output, allowi

How can I hedge the bet even if the franc plummets?

You are an arbitrageur in London. Swiss francs are presently selling in London for U.S. $0.67. You anticipate that they will increase in value and be selling for U.S. $0.70 in 30 days. You purchase $1 million worth of francs on the spot market. Is there anything that you can do to hedge your bet? That is, is there some way to en

Measuring Wage Inequality in the Airline Industry

Research how wage inequality is measured and if it is present in the airline industry. - Are there any current or past news events related to wage inequality in this industry? Explain. - What was the industry's method for determining that there was an inequality? Explain.

Foreign Exchange Puts and Calls

Task 3a: Problem Set Directions: Type your answer to each question where indicated. Use more space if needed. 1. On Monday morning, an investor takes a long position in pound futures contract that matures on Wednesday afternoon. The agreed-upon price is $1.78 for 62,500 pound sterling. At the close of trading on Monday,

Supply/demand and where cost analysis applies

Business AB makes Keyboards for laptop computers for sales to computer manufacturers (OEMs). Account information shows the total cost of producing four potential quantities of keyboard: Quantities of keyboard 50,000 100,000 150,000 200,000 Materials $ 125,000 $ 250,000 $ 375,000 $ 500,000 Leasing of Machinery

Question on International Trade

Part 1 - How would international trade function if there were no foreign exchange markets? Part 2 - If only spot markets existed, how would international trade function? Part 3 - Who are the major participants in the foreign exchange market? Part 4 - What are the effects of an appreciating/depreciating exchange rate

Investing Questions

16) You purchased the following futures contract today at the settlement price listed in the Wall Street Journal. Answer the questions below regarding the contract. Soybean Oil (CBT) 60,000 lbs.; cents per lb. Lifetime Open High Low Settle Change High Low Open Interest Oct. 15.28 15.33 15.25 15.29 -.02 20.35 15.

Various problems involving stock valuation and investment strategy.

10) With regard to market efficiency, what is meant by the term "anomaly"? Give three examples of market anomalies and explain why each is considered to be an anomaly. 11) Suppose that all investors expect that interest rates for the 4 years will be as follows: Year Forward Interest Rate 0(today) 5% 1 7% 2 9% 3

Economics of internet - Using betting games to predict outcomes has introduced a number of political contracts for the 2008 U.S. election already (!). Below is the current information for a bet that Barack Obama will win the 2008 U.S. Presidential election. Part A: How do these prediction markets rely on the three general purpose technologies that underlie the growth

De-Funding the National Weather Service

Senator Rick Santorum (R-PA) has suggested de-funding the National Weather Service, arguing that households receive weather information from media outlets and businesses can receive subscription (paid) weather forecasts from private weather forecasting firms. Consider the externality/public good aspects of weather forecasts and

Game Theory

1. Suppose that in a market there are only two drug dealers, A and B, who sell a homogenous product. Each dealer has a constant marginal cost of 10. Consider the possibility that the two dealers will coordinate their activities in order to increase their profits. The cartel agreement would have each dealer restrict its output so

Moral Hazard Model

Moral Hazard Model. Only Question #1. See attached file for full problem description.

Futures- Margin Account; DJIA

1) The worlds most actively traded commodity is crude oil. New York Mercantile Exchange (NYMEX) is the largest market for future oil contracts, both light sweet and brent. Contracts are traded in units of 1000 barrels. Currently, non-member initial margin is $4,725 per contract. The Maintenance requirement is $3,500. Suppose you

Draw a demand curve. What is the relationship of price to demand?

1. Draw a demand curve. What is the relationship of price to demand? Draw a supply curve. What is the relationship of price to supply? Illustrate equilibrium of supply and demand with a graph. What is equilibrium? Show a shift in demand on your graph. What causes a change in demand? What causes a shift in demand? Pro

Question About Price Of a Forward Contract

You enter into a forward contract to buy a 10 year, zero-coupon bond that will be issued in one year. The face value of the bond is $1,000, and the 1 year and 11 year spot interest rates are 4% per annum and 9% per annum respectively. Both of these interest rates are expressed as effective annual yields (EAY's). a) What is