Suppose you believe that Du Pont's stock price is going to decline from its current level of $ 84.57 sometime during the next 5 months. For $ 462.82 you could buy a 5-month put option giving you the right to sell 100 shares at a price of $ 78 per share. If you bought a 100-share contract for $ 462.82 and Du Pont's stock price actually changed to $ 87.64 at the end of five months, your net profit (or loss) after behaving rationally on the decision to exercise the option would be ______? Show your answer to the nearest .01. Do not use $ or , signs in your answer. Use a - sign if you lose money on the contract. Your Answer:

I. Stan Corp. provides the following data for 20x1.

Transactions in common stock:

      1/1, beginning                         300,000 shares

      4/1, issuance                           100,000 shares

8% $100 par nonconvertible cumulative preferred stock             $100,000

Issued at par

6% $100 par convertible cumulative preferred stock                  $200,000

Issued at $105

Convertible into 20,000 shares

Stock options                                                                                60,000 shares

  Option price                                                                                $25

Average market price                                                                 $35

Year-end market price                                                                $40

The net income for 20x1 is $2,300,000. The company’s tax rate is 30 percent. No conversion or options were exercised during 20x1.

Compute basic and diluted earnings per share.

Question 4
Consider the following three stocks constitute an index. Pt represents price at time t and Qt represents no. of shares outstanding at time t.

a) Compute rate of return of each stock at time 1.
b) Compute percentage change of the index value at time 1 given it is (i) value weighted index and (ii) price weighted index.
c) Assuming price weighted scheme is adopted, compute the new divisor if Stock P, $8 per share, replaces Stock C after market close at time 0.

Microeconomics:

15. Assume we are given a demand schedule that is represented by P = 100 – 12 Q and a supply schedule where P = 10 + 14 Q, where P = Price and Q = Quantity.

What is the equilibrium price and quantity?

• a) $750; 75 units.

• b) $40; 120 units.

• c) $500; 100 units.

• d) $52.50; 95 units.

Suppose that the supply schedule from question #15 changed to P = 5 + 12 Q. What net effect does this supply change have on equilibrium price and quantity compared to the original equilibrium?

• a) $52.50; 95 units.

• b) $250; 25 units.

• c) $12.50; 20 units.

• d) $47.50; 15 units.

1. . Suppose each ice cream truck has a marginal cost of $1.50 per ice cream cone sold and no fixed cost. Suppose the maximum number of ice cream cones sold by any one truck in a day is 100.

1. If the price of an ice cream cone is $2, how many ice cream cones does each truck want to sell?
2. If the industry is perfectly competitive will the price remain at $2 for an ice cream cone? If not, what will the price be?
3. If each ice cream truck sells exactly 100 ice cream cones a day and the demand for ice cream cones from ice cream trucks in the city is Q = 4400 - 1200P, how many ice cream trucks are there?

Betty and Bob must construct the ZCB yield curve for Freedonia. Freedonia has bonds of 6 months, 12 months, 18 months, and 24 months terms.

         A 6-month ZCB with maturity value of $100 is priced at $94.3396.

         A 1-year coupon bond with maturity value of $100 and a coupon rate of 8% per annum, payable semiannually is priced at $94.6112.

         An 18-month coupon bond with maturity value of $100 and a coupon rate of 19% per annum payable semiannually is priced at $105.44031.

         A 2-year coupon bond with maturity value of $100 and a coupon rate of 10% per annum payable semiannually is priced at $90.2871.

         a By viewing the coupon bond as the sum of the ZCBs find the per annum yield compounded semiannually for the 6 months, 1 year, 18 months and 2 years ZCB.

         b A special 2-year bond has maturity value of $100 and coupons of $4, $9, $5, and $7 in that order. Use the ZCB yield curve data to compute the price of the bond.

1. 6 month_______, 12 month______18month________24month________

The price of the special bond is___________

13. Consider the specific-factors model and use the following information to answer the questions below: Manufacturing: Sales revenue = PM · QM = 150 Payments to labor = W · LM = 100 Payments to capital = RK · K = 50 Percentage change in price = 0% Agriculture: Sales revenue = PA · QA = 150 Payments to labor = W · LA = 50 Payments to land = RT · T = 100 Percentage change in price = 20% Holding the price of manufacturing constant, suppose the price of agricultural good increases by 20% and the increase in wage is 10%.

a. What is the impact of the increase in the price of agricultural good on the rental for land and the rental for capital?

b. Explain what has happened to the real rental on land and the real rental on capital. In other words, based on your answer in a) above, why would the rental rate on land and capital change in this way?

c. If, instead of the situation considered above, the price of manufacturing was to fall by 20%, would landowners or capital owners be better off? Explain how the decrease in the price of manufacturing would affect labor income? Explain.

Biwei’s firm with market power faces a demand curve for its product of P=100–10Q, which is also the firm’s average revenue curve. The corresponding marginal revenue curve is MR=100-20Q. Assume that the firm faces a marginal cost curve of MC=10+10Q. (20 points)

1) If the firm cannot price-discriminate, what is the profit-maximizing level of output and price?

2) If the firm cannot price-discriminate, what are the levels of consumer and producer surplus in the market, assuming the firm maximizes its profit? Calculate the deadweight loss from market power.

3) If the firm has the ability to practice perfect price discrimination, what is the firm’s output?

4) If the firm practices perfect price discrimination (fully extract consumer surplus according to their marginal use values), what are the levels of consumer and producer surplus? What is the deadweight loss from market power?

Call option: Personal finance problem   Carol Krebs is considering buying 100 shares of Sooner​ Products, Inc., at ​$61 per share. Because she has read that the firm will probably soon receive certain large orders from​ abroad, she expects the price of Sooner to increase to ​$65 per share. As an​ alternative, Carol is considering the purchase of a call option for 100 shares of Sooner at a strike price of $56. The​ 90-day option will cost ​$900. Ignore any brokerage fees or dividends.

a. What will​ Carol's profit be on the stock transaction if its price does rise to $65 and she​ sells?

b. How much will Carol earn on the option transaction if the underlying stock price rises to ​$65​?

c. How high must the stock price rise for Carol to break even on the option​ transaction?

d. ​ Compare, contrast, and discuss the relative profit and risk associated with the stock and option transactions.