In September 2020, Facebook's stock price was about $250. A nine-month call on the stock, with an exercise price of $250, sold for $38. The risk-free interest rate was 2% a year. How much would you be willing to pay for a put on Facebook stock with the same maturity and exercise price? Assume that the Facebook options are European options. (Note: Facebook does not pay a dividend.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Value of put option
Q: 1. What should be the role of government in regulating financial institutions?
A: In the financial market, financial institutions are the players that act as the both the supplier as…
Q: What does Adam Smith's idea of an "invisible hand" represent? The way the markets coordinate trade.…
A: The concept of the invisible hand was first coined by Adam Smith in the 18th century and it refers…
Q: Which of the following pieces of legislation would be considered part of the economic stabilisation…
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: 4000 T = 220 TR = 300 I = 600 G = 250 mpute for the following: a. slope of the AE schedule b.…
A: Given information: C = 4000 + 0.27YD T = 220 TR = 300 I = 600 G = 250 Where C is consumption, YD is…
Q: Use an aggregate demand and supply diagram to illustrate and explain how each of the following will…
A: Demand and supply The much more fundamental precepts in economics are supply and demand. Regardless…
Q: A monopolist has set her level of output to maximize profit. The firm's marginal revenue is $20, and…
A: The monopoly market is characterized by the single firm in the market and it has monopoly power or…
Q: It is a hot day, and Elmo is thirsty. Here is the value he places on each bottle of water. Value of…
A: We have given the value Elmo places on each bottle of water. This value represents the maximum…
Q: Assume that a firm has the following production function: q = L0.5K0.6 a. Calculate output when L =…
A: Given Production function: q=L0.5K0.6 ......(1) Here L is labor and K denotes capital. To…
Q: QUESTION 10 Which pair of products are more likely to have a positive cross-price elasticity of…
A: The products having positive cross price elasticity are the ones that are complements to each other…
Q: Using the concepts of functioning’s and capabilities, explain why income (GDP per capita) is not a…
A: Gross Domestic Product (GDP) per capita depicts a country's GDP divided by its total population.
Q: 9. Consider an economy with the following aggregate production function F(K, L) = AKL, where A = Ag…
A: Introduction Production function of a firm is a functional relationship between inputs used and…
Q: Do fixed costs affect perfectly competitive firm’s output decisions in the short run? Briefly…
A: In a perfect competition, Firm produces where P = MC So, The output is determined by the situation…
Q: A consumer of three goods with wealth 10 chooses the bundle x = (2,3,0) when prices are p = (2,2,3),…
A: WARP sates that the consumer's preferences are consistent. Which means that if consumer prefers the…
Q: 1.Compute for the effective interest rate. Payment period = semi-annually Interest period = 12.76%…
A: Given Nominal interest rate =12.76% compounded monthly. We have to find the effective rate of…
Q: What does the rise of alternative products like Puff Bar tell you about the overall role of market…
A: Electronic cigarettes (e-cigarettes) extend the market to smoking as well as non-smoking men, women,…
Q: What will happen to the equilibrium price and quantity in a market, if more buyers enter the market…
A: The demand and supply of a commodity depends on a lot of factors other than its own price. When the…
Q: (b) Assume that utility U is a function of wealth X given by U = X.5 and that X = $1,000,000. In…
A: Expected value (EV) portrays the drawn-out typical level of a random variable in light of its…
Q: 10) The llowing graph shows the rect or a per O $150 thousand O $3,000 thousand O $6,000 thousand…
A: A deadweight loss is the price of market inefficiency, which occurs when supply and demand are out…
Q: Use your knowledge of cost functions to calculate the missed cost data in the accompanying table.…
A: Fixed costs are the cost which don't change with the increase in production. marginal cost are the…
Q: 16. What are benefits from learning elasticity? know how much quantity supply change due to price…
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: carefully explain what is happening in the following market.indicate the impact if any on demand,…
A: In the housing market, any change in the expected price of houses will have a significant impact on…
Q: 30. What consumer's budget constraint reflect? O the Trade-off between two goods O the relative…
A: “Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: The diagram to the right illustrates the market for outdoor concert tickets in a park in the middle…
A: A cost or benefit that an individual or community experiences but has no control over is referred to…
Q: 1. A consumer's preference map is shown: Good Y fo d a O g Good X a. Assume that the consumer's…
A: We have utility function U=xy, this is the famous form of utility function which is called cobb…
Q: QUESTION 19 P P₂ P₁ S Q₁ Q₂ How much is the price elasticity of supply in this graph? Higher than 1.…
A: Price elasticity of supply measures the change in quantity due to change in price. Price…
Q: Compute for the effective interest rate per monthl Nominal rate= 2.35% compounded yearly
A: The effective annual interest rate refers to the return on an investment or the rate owed in…
Q: Suppose the National Bank of Commerce has excess reserves of $8,000 and outstanding checkable…
A: Required Reserve Ratio refers to that part of checkable deposits that the commercial banks have to…
Q: Compare expansionary and contractionary fiscal policy.
A: Disclaimer: “Since you have asked multiple questions, we will solve the first question for you. If…
Q: Why is there a price hike in sugar in the Philippines?
A: A rise in price expressed as a percentage of goods or services. The demand for goods increased as a…
Q: The problem A young engineer is considering to built a 1 unit apartment near a commercial center.…
A: A purchase made with the intention of creating income or capital growth is known as an investment.…
Q: Basket Items Unit $ per unit (2020) $ per unit (2021) $ per unit (2022) Cougar Tail 1 donut $5 $4.50…
A: Inflation is measured using the consumer price index (CPI). It is used to calculate the typical…
Q: Who answers the three key economic questions in a command economic system? O custom & tradition…
A: In command economy all the production and allocation decisions are centralised.
Q: . On October 1, Brooke purchased a used car for $12,000 and agreed to pay for it as follows: 14/down…
A:
Q: How many S21 would the firm be required to produce and sell to record total revenue of zero? ii.…
A: Total revenue function for sale of $21: R(x)=2x2-9x-221 .......(1) Cost function: C(x)=-x2+4…
Q: Assume the utility Janet obtains from consuming apples is given in table below. Number of Apples…
A: Total utility refers to an aggregate amount of satisfaction that is received by the consumer through…
Q: It is said that tariffs varied and are used based on economic situation and stance. why is it used…
A: A tariff is a sort of expense required by a country on an imported decent at the boundary. Tariffs…
Q: Is pink tax considered as a price discrimination? Debate whether it is or not.
A: When the cost of providing the same commodity or service to different customers is the same, sellers…
Q: The following equations represent the quantity demanded (Qd) and the quantity supplied (Qs) for…
A: A price ceiling is the established upper limit on what a seller is allowed to charge for an item or…
Q: Ques 1. Sally consumes two goods, X and Y. Her utility function is given by the expression U=3XY².…
A:
Q: Question 8 When the Chinese firm "eZubao" went bankrupt in 2016 it was called a "Ponzi scheme." It…
A: Ponzi schemes are investment plans where the operator or operational firm pays returns to investors…
Q: QUESTION 5 A higher amount of a tax imposed by the government will be paid by the buyers. Always.…
A: When talking about incidence of tax, it can be seen that the tax burden depends upon the price…
Q: Tina can allocate her 8-hour day between baking and cooking. Each hour devoted to baking yields 2…
A: Disclaimer- “Since you have asked multiple questions, we will solve the first three questions for…
Q: A company produces a special new type of TV. The company has fixed costs of $467,000, and it costs…
A: Total revenue is the total amount of deals of goods and services. It is determined by multiplying…
Q: How much of the tax per cell phone is paid by producers and how much is paid by consumers?
A: Tax paid by producer = price received before tax - price received after tax Tax paid by Consumer =…
Q: Armando consumes two goods: grapes and wine. He can purchase both at the market and also possesses a…
A: According to the Marshallian demand function, which was named after Alfred Marshall, the amount of a…
Q: The demand for coffee is given by the function: Q = 8.5-p-0.3p + 0.1Y, where p is the price of…
A: Given The demand for coffee: Q=8.5-p-0.3ps+0.1Y .......(1) Here p is the price of coffee,…
Q: The resources used to make all goods and services are the * production possibilities. production…
A: Meaning of Production: The term production refers to the situation under which a firm occurs…
Q: Carefully explain what is happening in the market. Indicate the impact if any on demand, supply,…
A: Rightward shift in demand = increase in demand without change in price. Leftward shift in demand=…
Q: 6) The following graph shows the effect of a per-ticket tax on plane tickets from Boston to Tampa.…
A: Equilibrium price and quantity in the market is found by the intersection of demand and supply…
Q: What are the disadvantages of using loans to financial institutions to prevent bank panics?
A: We are well known that A bank panic is a situation when there are rumors of the bank being closed…
Step by step
Solved in 2 steps with 2 images
- Which of the following statements about the current value of a short European call option on Warwick plc stock, a non-dividend-paying stock, is/are true? (a) The current value of a short European call option is less than or equal to zero. (b) The current value of a short European call option decreases as the volatility of returns on Warwick plc stock increases, holding all else constant. (c) The current value of a short European call option decreases as the price of Warwick plc stock increases, holding all else constant.Calculate the value of a stock that is expected to pay a constant dividend of $1.05per year if the required return is 11%.The Franko Company has a beta of 1.20 By what percent will the rate of return on the stock of Franko Company increase if the market rate of return rises by 3%?
- Consider two European call options on the same stock with thesame strike price of $40. One option has a maturity of 1 month andthe other has a maturity of 3 months. Which option should be moreexpensive?A stock you are evaluating is expected to experience supernormal growth in dividends of 12 percent over the next three years. Following this period, dividends are expected to grow at a constant rate of 4 percent. The stock paid a dividend of $1.50 last year and the required rate of return on the stock is 11 percent. Calculate the stock's fair present value. (Do not round intermediate calculations.) Please show all the steps, including the equation(s).A company is considering mutually exclusive projects. The free cash flows associated with these projects are as follows: Project A Project B Initial outlay -$100,000 -$100,000 Year 1 $32,000 Year 2 $32,000 SO Year 3 $32,000 SO Year 4 $32,000 so Year 5 $32,000 $200,000 The required rate of return on these projects is 11%. They are of equal risk. 1. What is each project's MIRR? 2. Which project should be chosen? 3. Is it possible for conflicts to exist between NPV and IRR when independent projects are being evaluated? Explain your answer
- The preferred stock of North Coast Shoreline pays an annual dividend of $1.70 and sells for $20.24 a share. What is the rate of return on this security? OA. 5.95 percent OB. 7.08 percent OC.8.40 percent OD. 11.90 percent OE 14.17 percentLow-energy lightbulbs typically cost $3.65, have a life of nine years, and use about $1.75 of electricity a year. Conventional lightbulbs are cheaper to buy, for they cost only $.53. On the other hand, they last only about a year and use about $6.75 of energy. a. If the real discount rate is 4%, what is the equivalent annual cost of the two products? (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.) Equivalent Annual Cost Low-energy lightbulbs Conventional lightbulbssuppose that you invest $100 today in a risk-free investment and let the 4 percent annual intrest rate compound. Rounded to the full dollars, what will be the value of your investment 4 years from now?
- The Wintergrass Company has an ROE of 15 percent and a payout ratio of 40 percent. What is the company’s sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)In a financial market a stock is traded with a current price of 50. Next period the price of the stock can either go up with 30 per cent or go down with 25 per cent. Risk-free debt is available with an interest rate of 8 per cent. Also traded are European options on the stock with an exercise price of 45 and a time to maturity of 1, i.e. they mature next period. Find prices of Arrow-Debreu securities.1 Jim owns shares of Abco, Inc. preferred stock which he says provides him with a constant 6.58 percent rate of return. The stock is currently priced at $45.60 a share. What is the amount of the dividend per share? Round to the nearest cent. Do not include the dollar sign in your answer. (i.e. If your answer were $123, then type 1.23 without a S sign)