Julia Baker died, leaving to her husband Henry an insurance policy contract that provides that the beneficiary (Henry) can choose any one of the following four options. Money is worth 2.50% per quarter, compounded quarterly. Compute Present value if: Click here to view factor tables Correct answer. Your answer is correct. (a) $55,260 immediate cash. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present value $Entry field with correct answer 55260 SHOW SOLUTION LINK TO TEXT LINK TO TEXT Correct answer. Your answer is correct. (b) $4,040 every 3 months payable at the end of each quarter for 5 years. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present value $Entry field with correct answer 62980 SHOW SOLUTION LINK TO TEXT LINK TO TEXT Correct answer. Your answer is correct. (c) $19,160 immediate cash and $1,916 every 3 months for 10 years, payable at the beginning of each 3-month period. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present value $Entry field with correct answer 68459 SHOW SOLUTION LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. (d) $4,040 every 3 months for 3 years and $1,490 each quarter for the following 25 quarters, all payments payable at the end of each quarter. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present value $Entry field with incorrect answer 68894 LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. Which option would you recommend that Henry exercise?

Qd = 200 -5p

Qs = -100 + 20P           

Where: Q_D and Q_S are quantity demand and quantity supplied respectively, and P is the price.

At the market equilibrium price, producer surplus is equal to

Given:

Verizon

Total cost = $23 billion

Opportunity cost of capital = 10%

Annual cost = $2.3 billion

Expected demand = q = 2,100,000 – 6P

AT&T

Total cost = $4.6 billion

Opportunity cost of capital = 10%

Annual cost = $460 million

Expected demand = q = 425,000 – 60P

1. Calculate the expected annual profit that Verizon will earn if they price at service at $30/month, $60/month or $100/month. At which price do they maximize profit?

2. Calculate the expected annual profit that AT&T will earn if they price at service at $30/month, $60/month or $100/month. At which price do they maximize profit

Consider a one-year call option and a one-year put option on the same stock, both with an exercise price $100. If the risk-free rate is 5%, the current stock price is $103, and the put option sells for $7.50.

1. According to the put-call parity, what should be the price of the call option?

2. To your amazement, the call option is actually traded at $15. If the call option fairly priced, overvalued, or undervalued? What would you do to exploit this mispricing? Formulate your strategy and work out the payoff worksheet. What would be your arbitrage profit when the future stock price is equal to $0, $100, and $200?

The daily market return follows a Normal distribution with mean 0.08/252 and standard deviation 0.15/?252. The risk-free rate is 0.02. CAPM Betas of stock A and B are 2.1 and 0.5, respectively. All alphas are zero. Idiosyncratic volatilities of stock A and B are 0.12/?252 and 0.14/?252, respectively. The current price of stock A and B are $100/share and $200/share, respectively, and you sell short them. Initial margin rate is 50% and the maintenance margin is 30%. Compute probability that you receive the first margin call for either stock A or B within a year. Express the answer as a decimal after rounding it to the nearest hundredth. For example, if you have 0.126589, then the answer will be 0.13.

Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $54 per share. She borrows $2,600 from her broker to help pay for the purchase. The interest rate on the loan is 11%. a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price falls to $44 per share by the end of the year, what is the remaining margin in her account? (Round your answer to 2 decimal places.) c. If the maintenance margin requirement is 30%, will she receive a margin call? Yes No d. What is the rate of return on her investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

A stock initially selling at $100 could increase by 10% with probability of 60% or decrease by 10% with probability of 40% every six months. Suppose that the continuous interest rate is 5% per six-month. A call option on the stock specifies an exercise price of $100 and a time to expiration of one year, what is its price using binomial pricing method? A) 6.78 B) 4.75 C)6.84 D. None of the above

What price do farmers get for their watermelon crops? In the third week of July, a random sample of 42 farming regions gave a sample mean of x = $6.88 per 100 pounds of watermelon. Assume that σ is known to be $1.98 per 100 pounds.

(a) Find a 90% confidence interval for the population mean price (per 100 pounds) that farmers in this region get for their watermelon crop. What is the margin of error? (Round your answers to two decimal places.) lower limit $ upper limit $ margin of error $ (b) Find the sample size necessary for a 90% confidence level with maximal error of estimate E = 0.41 for the mean price per 100 pounds of watermelon. (Round up to the nearest whole number.) farming regions (c) A farm brings 15 tons of watermelon to market. Find a 90% confidence interval for the population mean cash value of this crop. What is the margin of error? Hint: 1 ton is 2000 pounds. (Round your answers to two decimal places.)

Below are some data from the land of milk and honey

Compute nominal GDP, real GDP, and the GDP deflator for each year, using the information from the above table. The base year is 2013. Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year. What is nominal GDP for each of these three years? What is real GDP for each of these years? What is the GDP deflator for each of these years? What is the percentage growth rate of real GDP from year 2 to year 3? What is the inflation rate as measured by the GDP deflator from year 2 to year 3?