1) Should economists use opportunity costs (Implicit costs) to understand the behavior of the firms as well as the individuals? (100-125 words)

2) Does a perfectly competitive producer have any incentive to lower its price, so it is below the current market price? Explain your answer.

Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%.

a. What was the price of this bond when it was issued?

b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?

c. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment?

Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%.

a. What was the price of this bond when it was issued?

b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?

c. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment?

No Excel Please

Suppose that Ally Financial Inc. issued a bond with 10 years until​ maturity, a face value of $ 1,000​, and a coupon rate of 6 % ​(annual payments). The yield to maturity on this bond when it was issued was 5 %.

a. What was the price of this bond when it was​ issued? b. Assuming the yield to maturity remains​ constant, what is the price of the bond immediately before it makes its first coupon​ payment? c. Assuming the yield to maturity remains​ constant, what is the price of the bond immediately after it makes its first coupon​ payment?

If a Japanese car costs P*=1,000,000 yen, a similar American car costs P= 20,000, and a dollar can buy 100 yen, e= 100 yen/$. Car is assumed to be identical and japan is next door to New Hampshire for simplicity:

a. What is the real exchange rate? In which country is car more expensive?

b. From which country would you buy and which country would you sell?

c. What would be your profit per car in yen and in $?

d. What would happen to the price of the car in japan and the price of the car in the US?

e. why is it called law of one price after such an arbitraging?

f. Why is the relationship between real and exchange rate, E, and nominal exchange rate, e, as a result?

Consider the Leverage Unlimited, Inc., zero coupon bonds of Year 22. The bonds were issued in Year 1 for $100. Determine the yield-to-maturity if the bonds are purchased at the following price. Round PVIF value in intermediate calculations to three decimal places. Use Table II to answer the question. Round your answers to one decimal place.

A). Issue price of $100 in Year 1. (Note: To avoid a fractional year holding period, assume that the issue and maturity dates are at the midpoint—July 1—of the respective years.   %

B). Market price as of July 1, Year 19, of $850. %

c). Explain why the returns calculated in Parts a and b are different. Over the period from Year 1 to Year 19, the general level of interest rates declined, causing bond prices to ______and yields to_______ .

Question #3:

The selling price of a Corporation's only product is $170.00 per unit and its variable expense is $39.10 per unit. The company's monthly fixed expense is $641,410.

Required:

Assume the company's monthly target profit is $65,450. Determine the unit sales to attain that target profit. Show your work!

Question #4:

A Company has fixed costs of $160,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company’s two products are provided below.

The sales mix for product X and Y is 60% and 40% respectively. Determine the break-even point in units of X and Y.

There are two companies named AA and BB. Company AA has a 5-year, 4% annual coupon bond with a $100 par value. BB has a 20-year, 3% annual coupon bond with a $100 par value. Both bonds currently have a yield to maturity of 2.5%.

Answer the following questions:

a. By how much do you think the price of each bond will change if interest rates suddenly fall by 2 percentage point (e.g from 3% to 1%)?

b. By how much do you think the price of each bond will change if interest rates suddenly increase by 3 percentage points?

c. Considering the price sensitivity of the five-year bond relative to the 20-year bond, what can you conclude?

Question 2 A 4-year zero coupon bond has a face value of $100 and a price of $82.270. The table below contains prices, coupons and the time to maturity for 3 annual coupon paying bonds that have a face value of $100. Please use annual compounding and annual discounting in your calculations and 3 decimal places in your workings. Time to Maturity (Years) Annual Coupon Price 1 3.0% $98.095 2 6.5% $102.790 3 5.8% $102.179 a) What is the price of a 3-year bond paying annual coupons of 5% and a face value of $100? b) If you had $1 million invested in the 3-year 5% coupon bond, how many of the 4-year zerocoupon bonds would you need to short-sell to hedge your interest rate risk? c) Without doing any calculations, discuss what actions you would need to take with your short position in the zero coupon to ensure your interest rate risk remained hedged until the maturity of the 3-year coupon paying bond.