Q9. You are doing research on a biotech firm. You think there are three scenarios for the drug depending on the results from the clinical trials:

i. Not effective; ii. Effective; iii. Super effective

with probabilities of i 30%; ii. 40%; iii. 30%

respectively.

You believe the stock with be worth i. $50; ii. $100; iii. $150

under those scenarios eventually.

Q9a. What is the STDEV today? (3 points)

Q9b. A preliminary trial was NOT very promising, which eliminates the chance of iii (ie “supereffective”). What is the stock price reaction (what is the new price) upon the release of the trial result? (3points)

Q9c. What is the price of a PUT option with strike of 100 BEFORE and AFTER the news release? (4points)

Table 21.3.2

Data from Southton

1a) Refer to Table 21.3.2. From the data in Table 21.3.2. What is Southton's consumer price index for the current year and what is the rate of inflation over the base year? Show your calculations

1b) When CPI is reported, commodity substitution bias in CPI is not considered. What does commodity substitution bias mean and why does it occur?

1c) What is meant by “core inflation rate” and why does the Bank of Canada consider the core inflation rate?

Assume the following market is a pure competitive and all firms are identical with the same costs functions: TC=100 +80*q+q^2 MC=80+2q The market demand is P=150-Q_d The equilibrium price in short run is $100. Note that Q is the market quantity and q is the quantity produced by a single firm. Calculate the output that minimizes average total cost (ATC). (2 points) What is the breakeven price for this firm in long run? How many firms will be in the long run? (3 points) Find the market supply equation 〖P = a + b*Q〗_S, where (a, b) are constant to be determined. And classify the supply as elastic, inelastic, etc. (3 points) What is the shutdown price for this firm in short run? (2 points) Assume a new technology causes the costs functions to change as follow: Fixed Cost: FC= $144 Average variable cost: AVC = 48 + q Marginal cost: MC = 48 + 2q Based on this information and holding everything else constant, how many firms will be in the lon

Assume the following market is a pure competitive and all firms are identical with the same costs functions:

                                                           TC=100 +80*q+q2

                                                           MC=80+2q

The market demand is                          P=150-Qd   

The equilibrium price in short run is $100.

Note that Q is the market quantity and q is the quantity produced by a single firm.

1. Calculate the output that minimizes average total cost (ATC). (2 points)
2. What is the breakeven price for this firm in long run? How many firms will be in the long run? (3 points)
3. Find the market supply equation P = a + b*QS, where (a, b) are constant to be determined. And classify the supply as elastic, inelastic, etc. (3 points)
4. What is the shutdown price for this firm in short run? (2 points)

An investor wants to buy a zero-coupon bond with face value $100, maturity date is 12 months (1 Year), market price is $50 and the annual inflation rate is 5%.

What is the nominal zero-coupon bonds yield to maturity? What is the real bond price?

Suppose Liam’s utility function for ice cream (q1) and pumpkin pie (q2) is U = 8q10^.5 + q2 His income is $100. The price of a pumpkin pie is $1. Suppose the price of ice cream increased from $1 to $2. Find CV, EV, and ΔCS.

Why the aggregate supply curve slopes upward in the short run

In the short run, the quantity of output that firms supply can deviate from the natural level of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen.

For example, the misperceptions theory asserts that changes in the price level can temporarily mislead firms about what is happening to their output prices. Consider a soybean farmer who expects a price level of 100 in the coming year. If the actual price level turns out to be 90, soybean prices will ______ , and if the farmer mistakenly assumes that the price of soybeans declined relative to other prices of goods and services, she will respond by   the quantity of soybeans supplied. If other producers in this economy mistake changes in the price level for changes in their relative prices, the unexpected decrease in the price level causes the quantity of output supplied to______ the natural level of output in the short run.

Suppose the economy's short-run aggregate supply (AS) curve is given by the following equation:

The Greek letter αα represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume that α=$2 billionα=$2 billion. That is, when the actual price level exceeds the expected price level by 1, the quantity of output supplied will exceed the natural level of output by $2 billion.

Suppose the natural level of output is $50 billion of real GDP and that people expect a price level of 100.

On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 90, 95, 100, 105, and 110.

ASLRAS01020304050607080901001251201151101051009590858075PRICE LEVELOUTPUT (Billions of dollars)

The short-run quantity of output supplied by firms will rise above the natural level of output when the actual price level   the price level that people expected.

Debtholders have a "residual claim" on assets. In other words, out of the company's assets, first the common stockholders are paid and the residual is paid to the debtholders.

True

False

An inflation linked bond (floating rate bond) matures in 2 years and has and a face value of $1,000 and a coupon rate of 10%. Inflation rate over the first year is 1% and the inflation rate over the second year is 3%. What is the amount that the investor will receive at the end of the first (1st) year?

You must implement the delete method. Below are the requirements:

• The delete method takes a Price as an argument and removes the Price from the queue if it is present. (If the Price was not present, the method does nothing).

• The method returns true if the Price was deleted and false otherwise.

• The method must run in logarithmic time. This is a key requirement. Solutions that are linear or worse will not receive credit. (You may assume that the running time for TreeMap’s operations are similar to the LLRB class in the book. You can also read the API for TreeMap to see what the running times for the various methods are.)

• You may not modify the function headers of any of the functions already present.

• The only field you may add to the PriceQueue class is a single TreeMap. (See Java’s API for the TreeMap class. It is basically the same as the book’s RedBlackBST class)

• You may not change or remove the package declaration at the top of the files.

• The rest of the queue should continue to behave as expected. In particular, the remaining Prices should still come out of the queue in FIFO order.

• The enqueue and dequeue methods should also run in logarithmic time while the size, peek, and isEmpty methods continue to run in constant time. Note, the enqueue method given to you runs in linear time because it scans the list to see if the price being added is already in the queue. You will need to replace this with a different way of checking that doesn’t take linear time. (Hint: Use the map!) • You will need to make changes to the Price class as well, but you can only add new functionality. You may not make any changes to the functions that are already there and they must continue to behave as before.

//// PRICE JAVA /////

public class Price {

private int dollars;

private int cents;

public Price(int dollars, int cents) {

if (dollars < 0 || cents < 0 || cents > 99)

throw new IllegalArgumentException();

this.dollars = dollars;

this.cents = cents;

}

public String toString() {

String answer = "$" + dollars + ".";

if (cents < 10)

answer = answer + "0" + cents;

else

answer = answer + cents;

return answer;

}

@Override

public boolean equals(Object obj) {

if (this == obj)

return true;

if (obj == null)

return false;

if (getClass() != obj.getClass())

return false;

Price other = (Price) obj;

if (cents != other.cents)

return false;

if (dollars != other.dollars)

return false;

return true;

}

}

/////// PRICE QUEUE //////

import java.util.Iterator;
import java.util.NoSuchElementException;

public class PriceQueue implements Iterable<Price> {
private Node first; // beginning of queue
private Node last; // end of queue
private int n; // number of elements on queue
// TODO - Add a TreeMap that maps prices to the node before that price in the queue
// and maps the first price (nothing before it) to null
//
// NOTE: You will need to modify preexisting methods to maintain the invariant on the TreeMap

// helper linked list class
private static class Node {
private Price price;
private Node next;
}

/**
* Initializes an empty queue.
*/
public PriceQueue() {
first = null;
last = null;
n = 0;
}

/**
* Returns true if this queue is empty.
*
* @return {@code true} if this queue is empty; {@code false} otherwise
*/
public boolean isEmpty() {
return first == null;
}

/**
* Returns the number of Prices in this queue.
*
* @return the number of Prices in this queue
*/
public int size() {
return n;
}

/**
* Returns the Price least recently added to this queue.
*
* @return the Price least recently added to this queue
* @throws NoSuchElementException if this queue is empty
*/
public Price peek() {
if (isEmpty()) throw new NoSuchElementException("Queue underflow");
return first.price;
}

/**
* Adds the Price to this queue if it is not already present,
* otherwise it throws an IllegalArugmentException.
*
* @param price the Price to add
*
* @throws IllegalArgumentException if price is already in the queue.
*/
public void enqueue(Price price) {
   for(Price p : this)
       if (p.equals(price))
           throw new IllegalArgumentException();
Node oldlast = last;
last = new Node();
last.price = price;
last.next = null;
if (isEmpty()) first = last;
else oldlast.next = last;
n++;
}

/**
* Removes and returns the Price on this queue that was least recently added.
*
* @return the Price on this queue that was least recently added
* @throws NoSuchElementException if this queue is empty
*/
public Price dequeue() {
if (isEmpty()) throw new NoSuchElementException("Queue underflow");
Price price = first.price;
first = first.next;
n--;
if (isEmpty()) last = null; // to avoid loitering
return price;
}
  
  
/**
* Deletes a Price from the queue if it was present.
* @param price the Price to be deleted.
* @return {@code true} if the Price was deleted and {@code false} otherwise
*/
public boolean delete(Price price) {
   // TODO implelment me!!!
   // Make sure the running time is no worse than logrithmic!!!
   // You will want to use Java's TreeMap class to map Prices to the node
   // that precedes the Price in the queue
   throw new RuntimeException("Not Implemented!!!");
}

/**
* Returns a string representation of this queue.
*
* @return the sequence of Prices in FIFO order, separated by spaces
*/
public String toString() {
StringBuilder s = new StringBuilder();
for (Price price : this) {
s.append(price);
s.append(' ');
}
return s.toString();
}

/**
* Returns an iterator that iterates over the Prices in this queue in FIFO order.
*
* @return an iterator that iterates over the Prices in this queue in FIFO order
*/
public Iterator<Price> iterator() {
return new PriceListIterator(first);
}

// an iterator, doesn't implement remove() since it's optional
private class PriceListIterator implements Iterator<Price> {
private Node current;

public PriceListIterator(Node first) {
current = first;
}

public boolean hasNext() { return current != null; }
public void remove() { throw new UnsupportedOperationException(); }

public Price next() {
if (!hasNext()) throw new NoSuchElementException();
Price price = current.price;
current = current.next;
return price;
}
}
}

Helix Corporation uses the weighted-average method in its process costing system. It produces prefabricated flooring in a series of steps carried out in production departments. All of the material that is used in the first production department is added at the beginning of processing in that department. Data for May for the first production department follow:

Required:

1. Calculate the first production department's equivalent units of production for materials and conversion for May.

2. Compute the first production department's cost per equivalent unit for materials and conversion for May.

3. Compute the first production department's cost of ending work in process inventory for materials, conversion, and in total for May.

4. Compute the first production department's cost of the units transferred to the next production department for materials, conversion, and in total for May.

Helix Corporation uses the weighted-average method in its process costing system. It produces prefabricated flooring in a series of steps carried out in production departments. All of the material that is used in the first production department is added at the beginning of processing in that department. Data for May for the first production department follow: Percent Complete Units Materials Conversion Work in process inventory, May 1 60,000 100 % 50 % Work in process inventory, May 31 40,000 100 % 30 % Materials cost in work in process inventory, May 1 $ 50,200 Conversion cost in work in process inventory, May 1 $ 13,900 Units started into production 246,000 Units transferred to the next production department 266,000 Materials cost added during May $ 78,320 Conversion cost added during May $ 200,160 Required: 1. Calculate the first production department's equivalent units of production for materials and conversion for May. 2. Compute the first production department's cost per equivalent unit for materials and conversion for May. 3. Compute the first production department's cost of ending work in process inventory for materials, conversion, and in total for May. 4. Compute the first production department's cost of the units transferred to the next production department for materials, conversion, and in total for May.