Question
In: Economics
Suppose you are a speculator who lives in a world where there are two islands: Island...
Suppose you are a speculator who lives in a world where there are two islands: Island A and Island B. These two islands produce and trade rice. Today, the spot price for rice in both islands is trading at 320 cts/bushell and the storage costs in either island is 40 cts/bushell for a period of two weeks. Additionally, since these two islands trade, you can buy shipping to take from one island to the other one. The cost of shipping is 30 cts/bushell from one island to the other and it takes two weeks from the time it leaves one port to reach the final destination. Shipping is a complex process since it requires the grain to be loaded into containers, then stacked and secured inside the vessel along with everyone else’s cargo. Today, the 2-week forward with delivery in Island A is trading at 360 cts/bushell and the 2-week forward with delivery in Island B is trading at 340 cts/bushell. Can you arbitrage this market and how much do you stand to earn for every unit traded? (Suppose you don’t have an initial cash position, but that the interest rate is zero percent).
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Q7. Ivy lives in a world where there are only two goods, X and Y. Her...
Q7. Ivy lives in a world where there are only two goods, X and
Y. Her utility function per period is given by: U = 30x – 0.5x2 +
40y - y2
(c) Show that at the point of
utility-maximization in (b) the ratio of marginal utility of the
two goods equals their price ratio.
(d) Provide a one-sentence interpretation for
the value of the Lagrangian multiplier obtained in (b).
(e) At what income level is Ivy’s utility of
money...
Suppose you are modeling a two country, two good world within the H-O framework where the...
Suppose you are modeling a two country, two good world within
the H-O framework where the two countries are the United States and
Canada and the two goods are computers and lumber. Further assume
that the United States is capital abundant, and computers are
capital-intensive. Using the three theorems of the H-O model,
explain in words and appropriate diagrams/equations what happens in
BOTH the United States and Canada when trade is allowed.
Suppose that you are a speculator and that you noticed that the Japanese yen (F has...
Suppose that you are a speculator and that you noticed that the
Japanese yen (F has depreciated substantially against the U.S.
dollar (USD) over the several months. The current spot rate S0.0090
(i.e. 0.0090 USD per Y). Several major financial press articles
suggest that the yen will continue to substantially depreciate over
the next several months. However, you expect the value of the yen
to remain very stable over the next several months (i.e., you
expect very little to no...
Consider an individual who lives for two periods t = 1, 2. Suppose she is in...
Consider an individual who lives for two periods t = 1, 2.
Suppose she is in debt and, given an interest rate r, she optimally
decides to consume (C1;C2). Now, imagine that the interest rate r
falls. What do you expect to happen to her optimal consumption in
the two periods? Explain your answer referring to income and
substitution e§ects, to the budget constraints, and the Euler
equation.
how would you feel about working for a boss who lives half way around the world?...
how
would you feel about working for a boss who lives half way around
the world? how might this affect you as sn employee?
You are in a world where there are only two assets, gold and stocks. You are...
You are in a world where there are only two assets, gold and
stocks. You are interested in investing your money in one, the
other, or both assets. Consequently, you collect the following data
on the returns on the two assets over the past six years.
Gold
Stock Market
Average return
8%
20%
Standard
deviation
25%
22%
Correlation
-0.4
Compute the expected return and standard deviation of a
portfolio consisting of
0% stocks
25% stocks
50% stocks...
You are in a world where there are two assets: gold and stocks. You are interested...
You are in a world where there are two assets: gold and stocks.
You are interested in investing your money in one or both of these
assets. You collect the following data on the returns of these two
assets over the past six years: Gold Stock Market Average Return
10% 18% Standard Deviation 30% 22% Your estimate of the correlation
between gold and stocks is negative -0.40. What are the weightings
of a portfolio composed of gold and stocks that...
You are in a world where there are two assets: gold and stocks. You are interested...
You are in a world where there are two assets: gold and stocks.
You are interested in investing your money in one or both of these
assets. You collect the following data on the returns of these two
assets over the past six years: Gold Market Average Return = 10%
Stock Average Return = 18%, Gold Standard Deviation = 30% Stock
Market Standard Deviation 22% Your estimate of the correlation
between gold and stocks is negative -0.40. What is the...
Suppose you are a currency speculator trying to forecast what will happen to the value of...
Suppose you are a currency speculator trying to forecast what
will happen to the value of the dollar over the next year. Suppose
all of our usual theories hold (uncovered, covered and real
interest rate parities, absolute and relative purchasing power
parities, as well as the Fisher effect for nominal interest
rates).
For each of the separate cases below,
use the information in that case to compute the expected
depreciation of the dollar , or state if there is not...
Suppose there are only two oil producing countries in the world and who compete with one...
Suppose there are only two oil producing countries in the
world and who compete
with one another: Canada and Norway. The world inverse demand
for oil is given by P(Q) =
180 ? qC ? qN where qC and qN are the quantities of oil
brought to market by Canada and Norway,
respectively. The cost function for extracting oil is
identical across both countries and equal to
C(q) = 60q. The two countries engage in Cournot competition by
choosing how...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Discuss the significance of a proposal What elements do you think are needed for the proposal...
- 1) Given the following equations: QD = 5,000 + 0.5 I + 0.2 A -...
- How has the Supreme Court's Citizens United decision changed campaigns in America? (long answer is appreciated...
- You are a Derivatives Trader at a major Broker-Dealer. At the end of the week you...
- What are the two reasons that limit the ability of correlational studies to provide information on...
- Suppose that 20 monthly payments of $100 each are followed by 30 monthly payments of $200...
- D. Explain what it means for recommendations to be specific and actionable. E. Discuss how charts...
ADVERTISEMENT