EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Question
Chapter 4.3, Problem 2MQ
To determine
The reason behind choosing single feed lines at banks rather than lines for tellers considering the diversification of risk involved.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Suppose that there is a 45 percent change that George's coffee shop will make $10000 in profits in January and a 45 percent chance it will make 0 profits and a 10 percent chance that it will make -$1000 in profits (i.e., it will lose $1000).
Calculate the coffee shop's expected profits
D7
You run an oil company that wants to extract an oil reserve. The total stock of oil in the reserve is 600 barrels. You must sell all of the oil in two time periods, so the quantity extracted
will be q1 +q2 = 600. The price per barrel you can sell the oil for is pt = 710 − 1 2 qt in each period. The cost of extracting a single barrel is not constant, but increases as more oil is extracted in a period, c(qt) = 1 2 qt. If the interest rate is 5%, how much oil will you extract in periods 1 and 2 if you wanted to maximize profits.
The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, andtwo years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of£) as a function of the price of the bond is S = 2P + 400.
b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantitydemanded/supplied at this interest rate? What happens to the demand/supply of the bond asthe interest rate increases? Explain why. c) What is the equilibrium interest rate?
Chapter 4 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 4.1 - Prob. 1MQCh. 4.1 - Prob. 2MQCh. 4.1 - Prob. 3MQCh. 4.2 - Prob. 1TTACh. 4.2 - Prob. 2TTACh. 4.2 - Prob. 1MQCh. 4.3 - Prob. 1TTACh. 4.3 - Prob. 2TTACh. 4.3 - Prob. 1MQCh. 4.3 - Prob. 2MQ
Ch. 4.3 - Prob. 3MQCh. 4.3 - Prob. 1.1TTACh. 4.3 - Prob. 1.2TTACh. 4.3 - Prob. 2.1TTACh. 4.3 - Prob. 2.2TTACh. 4.3 - Prob. 1.1MQCh. 4.3 - Prob. 2.1MQCh. 4.3 - Prob. 3.1MQCh. 4.4 - Prob. 1TTACh. 4.4 - Prob. 2TTACh. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQCh. 4 - Prob. 4.1PCh. 4 - Prob. 4.2PCh. 4 - Prob. 4.3PCh. 4 - Prob. 4.4PCh. 4 - Prob. 4.5PCh. 4 - Prob. 4.6PCh. 4 - Prob. 4.7PCh. 4 - Prob. 4.8PCh. 4 - Prob. 4.9PCh. 4 - Prob. 4.10P
Knowledge Booster
Similar questions
- The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, andtwo years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of£) as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantitydemanded/supplied at this interest rate? What happens to the demand/supply of the bond asthe interest rate increases? Explain why. c) What is the equilibrium interest rate? d) Suppose that the bond trades at premium. Is there excess demand or supply? Explain.e) There is a business cycle expansion, so both supply and demand shifts. After the shift, thenew demand curve is given by: D = 4000 + X − 2P, whereas the new supply curve is S =2P + 200. For which values of X will the interest increase/decrease? Which values of X arein line with empirical data?arrow_forwardHi there, I need help solving a problem and am unsure how to go about solving the question. It is a practive question from a textbook and am trying to understand it further. I need a bit more help solving 1 a) and b). I have already obtained the values of the expected return at t = 0 and the expected utilities at t = 0 for both scenarios (direct investing) and (depositing with the bank). Thanks Here is the question: Consider the basic setup of the Diamond-Dybvig (1983) model. Specifically, thereare three periods, denoted t = 0, 1, 2, a single consumption good, and an illiquidinvestment opportunity that pays gross return 1.1 if liquidated at t = 1, or grossreturn 2.2 if liquidated at t = 2. There are 30 people in the economy, each endowed with 1 unit of the consumptiongood at t = 0. At t = 1, exactly 11 will randomly realize that they need to consumeat t = 1 (the early consumers), the remaining 19 people will need to consume at t = 2(the late consumers). The utility derived from…arrow_forwardThe quarrying cost of marble and granite blocks plus delivery cost to the processing plant for each is P 2,400 per cubic meter. Processing cost of marble into tiles is P 200 per sq.m, and that of granite into tiles is P 600 per sq.m. If marble has a net yield of 40 sq.m. of tiles per cu.m. of block and sells at P 400 per sq.m., and granite gives a net yield of 50 sq.m. of tiles per cu.m. of block, and sells at P1,000 per sq.m., determine the more profitable material considering all other costs to be the same, and by how much?arrow_forward
- Select all of the following that are true regarding hedging: A. Hedging is risk mitigation through diversification. B. Hedging is the same as arbitirage since it acts in across markets C. Hedging increases the returns of an investment D. Buying an risky investment is an example of hedging Detailedly Explanation Please, Thank you!arrow_forward6. for a large company (she travels by car). She earns 900 euros a week in fixed salary, but if she reaches the set for a week sales target, she receives a bonus of 325 euros that week. The probability of getting the bonus is 0.2. A person is a traveling salesman of goods Her utility function over money is given by U=√W, where W is the wealth in SEK per week. 6a 6b What is her expected weekly bonus? Her boss offers her another job within the same company. If so, she would work in an office with a certain personnel responsibility and receive a fixed salary per week (no bonuses). What salary per week must her boss at least offer her in order for her to accept new work? Justify your answer based on expected utility theory.arrow_forwardSubmit All Question 28 of 30 Suppose Jon decides to purchase either a long-term Treasury bond or a share of stock from a company in the Dow Jones Industrial Average. Assume that either one will behave similarly to the average security in their class, and ignore the effect of market conditions. Which security is more likely to lose most of its value in the next year after Jon purchases it? O the probabilities of major loss are the same they are both guaranteed to increase in value the stock the bond Based on historical returns, which security is likely to grow more significantly in value after Jon purchases it? the bond 8:27 PM a 46°F E 4) 12/15/202arrow_forward
- Racine Tire Co. manufactures tires for all-terrain bicycles, The tires sell for P60 and variable cost per tire is P45; monthly fixed cost is P450,000. Requirement: 1. Calculate the firm's break-even point in sales pesos 2. What will be the new net income? 3. If the company can increase sales volume by 15 percent above the current level, 8,400,000 tires monthly What will be the increase in net income?arrow_forwardHello can any one help with this Economics question: A contractor spends Dollar 3,000 to prepare for a bid on a construction project which, after deducting manufacturing expenses and the cost of bidding, will yield a profit of dollar 25,000 if the bid is won. If the chance of winning the bid is ten per cent, compute his expected profit and state the likely decision on whether to bid or not to bid?arrow_forwardDefine the term Expected return on a risky asset?arrow_forward
- Assume you can invest in 2 projects whose payoff depend on the state of the economy. The profits from each project for each state of the economy are presented below. What are the expected payoffs of each project if there is a 50% chance of a recession and a 50% of no recession? Profit under recession Profit under normal conditions Project 1100,000 150,000 Project 2 50,000 240,000 O Project 1: $120,000 and Project 2: $150,000 Project 1: $125,000 and Project 2: $115,000 Project 1: $145,000 and Project 2: $145,000 O Project 1: $125,000 and Project 2: $145,000arrow_forwardStudies have concluded that a college degree is a very good investment. Suppose that a college graduate earns about 79% more money per hour than a high-school graduate. If the lifetime earnings of a high-school graduate average $1,070,000, what is the expected value of eamings of a college graduate? The expected value of earnings of a college graduate is $. (Round to the nearest whole dollar.)arrow_forwardwhat happens when expected profit equal total investmentarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you