On October 17, 2007, the classified ads on the web site of The Seattle Times listed the following 13 used Toyota Prius automobiles for sale; the data set below shows the year, color, mileage (in miles) and asking price (in U.S. dollars) for each car:

year     color      mileage     price
2006     green        17043     25995
2007     gray         12628     24980
2005     maroon       24039     24885
2005     silver       48226     23995
2006     black        10522     22995
2004     silver       66345     21995
2007     white         5611     21995
2005     gold         24479     21595
2004     white        14618     20995
2005     silver       53699     20980
2004     silver       47649     17995
2003     white        39600     17500
2005     black       103126     16995

We wish to investigate a possible association between the mileageof each Prius and its price. You should construct a scatterplot of this data.

assume that a linear model is appropriate, regardless of your answer to the previous question.

1. Find the equation of the regression line for this data that predicts price based upon mileage:

2. Use the model to predict the asking price of a Toyota Prius with 450,000 miles, or explain why such a prediction is not appropriate:

3. Use the model to predict the asking price of a Toyota Prius with 45,000 miles, or explain why such a prediction is not appropriate:

4. Compute the residual for the green Prius:

Discuss the implications that the 2008 recession ( that originated in the US) had on UK

1. Elaborate very briefly on the specific aspects of the event that you are going to examine. Assemble your facts and your evidence. What policies or other factors which helped precipitate the situation in UK

2. Map the event into a “shock” and trace the shock in one of the model diagrams you learned, discussing its macroeconomic consequences within the framework chosen. You may assume that the economy starts off in both short-run and long-run equilibrium.

3. Assess the government policy response, showing what the end impact was. Describe briefly what was actually done in practice, then represent it on a diagram.

(Step 1 – Place the macroeconomy in short- and long-run equilibrium.

Step 2 – Demonstrate the impact of the macroeconomic shock on the economy in the short run.

Step 3 – Demonstrate the impact of the policy response on the macroeconomy in the short-run.

Step 4 – Show the long run equilibrium of the economy after the initial shock and the policy response. Trace and explain this path on a diagram summarizing one of IS-LM MODELS )

4. Discuss the implications of the crisis for one set of individuals (for instance, households in that situation, a certain age group of the population, etc., certain groups of workers) and businesses (a specific firm or sector, your business sector or firm, etc.)

Suppose that the spot and the forward exchange rates between the UK pound (£) and the Euro (€) are S0=0.5108 £/€ and Ft=3 months=0.5168 £/€. The time to maturity of the forward contract is 3 months. The annual interest rate of £-denominated Eurocurrency market deposits is 4.08%. The annual interest rate of €-denominated, 3-month Eurocurrency market deposits is 3.15%.
a) Examine whether there exists an arbitrage opportunity.
b) Devise an arbitrage strategy. Describe the transactions and calculate the arbitrage profits.

a) Given that annual inflation in the UK is 1.7%, annual inflation in the US is 1.81% and the current spot rate is S(GBP/USD) = 1.2644 what is the spot rate – S(GBP/USD) – in 12 months.

b) Explain what is meant by a fixed exchange rate regime.

c) The current spot rate for British pound to the Australian dollar is S(GBP/AUD) = $1.8717/£. Additionally the current spot rate for the British pound to the euro is S(GBP/EUR) = €1.1479/£.

i. Calculate the spot rate for Australian dollar to the euro S(AUD/EUR)

ii. Given that there is a broker in the market quoting S(GBP/EUR) = 1.200 demonstrate the potential arbitrage opportunity

Suppose that the term structure of interest rates is flat in the US and UK. The USD interest rate is 2.5% per annum and the GBP rate is 2.9% p.a. Under the terms of a swap agreement, a financial institution pays 3% p.a. in GBP and receives 2.6% p.a. in USD. The principals in the two currencies are GBP20 million and USD32 million. Payments are exchanged every year, with one exchange having just taken place. The swap will last 3 more years NOTE: 1 USD = 0.8 GBP

i) Write out the formula for the valuation of a currency swap in terms of bond prices. From this formula, explain what prices and rates you need to calculate the value of a swap.

Suppose that the term structure of interest rates is flat in the US and UK. The USD interest rate is 2.5% per annum and the GBP rate is 2.9% p.a. Under the terms of a swap agreement, a financial institution pays 3% p.a. in GBP and receives 2.6% p.a. in USD. The principals in the two currencies are GBP20 million and USD32 million. Payments are exchanged every year, with one exchange having just taken place. The swap will last 3 more years NOTE: 1 USD = 0.8 GBP

i) Show the payments to be made in a table and then calculate the value of the swap to the financial institution. Assume all interest rates are compounded continuously.

Within the uk, analyse how the a FX market of your choice has been impacted by a recent political event of your choice. Include charts to illustrate your analysis.
Your answer should include a brief outline of the political event at the start of your answer. (750 words minimum) Thanks

In France and Germany, it is difficult for a household to increase its borrowing based on an increase in the market value of the house. In addition, large down-payments (as a percentage of the house price) are required for house purchases. 3. What do you conclude about the role of the financial accelerator in France and Germany compared with the UK and the US?

Why is it that heat pumps are rarely used in the UK to heat homes? However in a remote               region there may be reason to use such a system. What type of system might you       recommend and what would be the criterion to justify the heat pump as an alternative to a          simple oil boiler?

GIVE FULLY EXPLAINED AND TYPED ANSWER

Which of the following securities are bought and sold through the capital markets?

a) A Certificate of Deposit

b) A Forward Rate Agreement with a 9-month maturity

c) T-Bills issued by the UK Government with 6 months to maturity

d) Equity shares of British Telecom

e) Commercial Paper issued by HSBC