Consider a simple two person exchange economy. Ahmad and Maria consume two goods, X and Y. Maria is willing to trade 2 Y for 1 X and Ahmad is willing to trade one Y for 1 X. The government gives Maria 5 X and 5 Y and Ahmad 7 X and 10 Y. Illustrate the situation using an Edgeworth box, labeling all points, axes, and indifference curves. Since you are given numbers, I expect you to use them. (10 pts) Is the allocation provided above Pareto efficient? (10 pts) If so, explain why. If not, provide a specific Pareto improvement that could be made. Is government intervention necessary here?

An American up-and-in put has strike $10 and barrier $10.50. At which nodes of a three-step model would exercising the put possibly provide some payoff? Use Cox-Ross-Rubenstein notation with S=10, u=1.1 and d=0.9. O (2, 0), (2, 1), (3, 0), (3, 1). O (2, 1) and (3, 1) O (1, 0), (2, 0), (2, 1), (3. 0) and (3, 1). O (3, 0) and (3, 1).

Consider two lotteries. Lottery A is such that an individual receives a prize of 1.25 units of a consumption good with 50% probability and 0.75 units of the consumption good with 50% probability. Lottery B presents the winner with a prize of 1.5 units of a consumption good with 50% probability and a prize of 0.5 units of the consumption good with 50% probability.   For this specific example, which lottery o↵ers higher value (in terms of expected utility) and what is it about the shape of the utility function that yields this result?

No need to define law of one price and what drives law of one price. I just wanted I need illustration with two examples of these questions..

Suppose that we can describe the world using two states and that two assets are available, asset X an asset Y. We assume the asset’s future prices have the following distribution   State                Future Price Asset X               Future Price Asset Y 1                      $25                                          $50 2                      $20                                          $40   The values of the unit claims implied by these assets are such that:     A. C1 and C2 cannot be determined   B. C1=1 and C2=1   C. C1=1, but we cannot determine C2   D. C1=5/4 and C2=5/4

Answer the following in a couple of sentences. e) Compare swaps with forwards f) Why do you buy on margin?

Suppose that we can describe the world using two states and that two assets are available, asset K an asset L. We assume the asset’s future prices have the following distribution   Suppose that we can describe the world using two states and that two assets are available, asset K an asset L. We assume the asset’s future prices have the following distribution state 1             Future Price Asset K $55 $45 2.          Future Price Asset L $60 $30 The current price of asset K is $50, and the current price of asset L is $50. What are the values of the unit claims (C1 and C2)? What is the risk free rate implied by these assets? What is the “risk neutral probability” of state 1? What is the “risk neutral probability” of state 2? What is the price implied for an asset providing $100 in state 1 and $50 in state 2? You plan to buy a home for $100,000 in the future.You want to guarantee that you will have the money.What would you buy/sell today to accomplish this, and what…

Two farmers, Joe and Giles, graze their animals on a common land. They can choose to use the common resource lightly or heavily and the resulting strategic interaction may be described as a simultaneous-move game.     GILES       light heavy JOE light 40, 40 20, 55   heavy 55, 20 30, 30 The payoff matrix is the following: Joe Giles light heavy light 40, 40 20, 55 heavy 55, 20 30, 30 1. Find the Nash equilibrium of the game and show that it is an example of "Prisoners' Dilemma" games. 2. Suppose that the same game is repeated infinitely. Is the {light, light} outcome a Nash equilibrium if both players play a Grim strategy and have a discount factor of 0.7? Distinguish simultaneous-move games and dynamic games in terms of information. Explain why in dynamic games Nash equilibria may not be subgame perfect. Using examples, show how non-credible threats are ruled out using backward induction.

Please do as many as you can:

Which among these options for Mr. D is the best for him to pay the least? A. higher rateB. pay in cashC. shorter period of paymentD. increase time