EBK INTERMEDIATE MICROECONOMICS AND ITS
EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 15.2, Problem 2.1TTA
To determine

Effect of a policy on purchase price of a stock when stock price declines.

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What happens to interest rates in the market if the stock brokerage commission declines? Explain the reason for your answer!
Discuss the pricing formula of a future contract on an investment asset that provides no income. How would you modify this formula if: The future is on a stock index that pays dividends? The future is on currencies?
Suppose you expect a stock to pay a dividend of $10 every year forever and the discount rate is fixed at 5%. What would expect the price of that stock to be? What happens to the price of the stock if the discount rate falls to 2%? (Note: this exercise might help explain why the stock market is so high these days, despite the COVID-19 pandemic and lackluster economy.)
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