3. Revealed Preference

Felix chooses between clothing, q1, and food, q2. His initial income is

$1,000 a month, p1=$100, and p2=$10. At his initial bundle he

consumes q1=2 and q2=80. Later, his income rises to $1,200 a

month, and the price of clothing rises to p1=$200, but the price of

food does not change (p2=$10). As a result, he reduces his

consumption of clothing to q1=1, and he increases his consumption of

food to q2=100. Using a revealed preference reasoning, can you

determine how he ranks the two bundles? Explain your answer.

Suppose we are analyzing the market for oranges in 2017. Graphically illustrate the impact of each of the following events would have on supply and demand curves. Also show how equilibrium price and quantity would change in each scenario. See instruction video, "Week 2_Homework Guideline.ppsm". Make sure you provide narrative discussions on each scenario to receive full credits A. In 2017, Wildfires destroyed a majority of orange farms, reducing orange production substantially (Graphical analysis + Written discussion=at least 100 words) B. The price of apple, orange substitute, decreased in 2017. (Graphical analysis + Written discussion=at least 100 words)

Suppose we are analyzing the market for oranges in 2017. Graphically illustrate the impact of each of the following events would have on supply and demand curves. Also show how equilibrium price and quantity would change in each scenario. See instruction video, "Week 2_Homework Guideline.ppsm". Make sure you provide narrative discussions on each scenario to receive full credits

A. In 2017, Wildfires destroyed a majority of orange farms, reducing orange production substantially (Graphical analysis + Written discussion=at least 100 words)

B. The price of apple, orange substitute, decreased in 2017.  (Graphical analysis + Written discussion=at least 100 words)

Type or pa

1. A study by Metro Bus Service on the effect of bus-ticket prices on the number of passengers produced the following results:

Ticket Price:        25           30           35           40           45           50           55           60

Pssngrs/100 m   800         700         780         660         640         600         620         620

1. Plot these dat
2. Develop the estimating equation that best describe these data.
3. How can we ensure that the above model best used for provided data?
4. Predict the number of passengers per 100 miles if the ticket price were 50. Use 95% approximate prediction interval.v

ste question here

1(a). Your friend has entered a zero-cost portfolio in 3 month Microsoft options as follows: she bought 100 put options at K=32 for $8 each, she wrote 200 put options at K=28 for $6 each and she bought 100 put options at K=24 for $4 each. Create a table showing the total value of her portfolio at time T if the price of Microsoft stock is 20,22,24,26,28,30,32,34,36. (please show the detail for the caculate)

b) For the option portfolio in part (a), draw each option and the combined position on a graph with $ on the vertical axis and the stock price at time T on the horizontal axis).

Today, one needs to pay 130 US dollars for 100 euros. The continuously compounded US interest rate is 1% and the continuously compounded euro interest rate is 2%.

(1) What is the 9-month forward price for 100 Euros?

(2) Suppose you will receive 2 mln US dollars and 1 mln. euros in six months. The current forward price of a forward contract that matures in six months is F0,6mth = 1.2935 USD per 1 euro. Suppose you short eight forward contracts today (the contract size is 125,000 Euro). How many USD and euros will you have in six months?

Consider a two-period binomial model for the stock price with both periods of length one year. Let the initial stock price be S0 = 100. Let the up and down factors be u = 1.25 and d = 0.75, respectively and the interest rate be r = 0.05 per annum. If we are allowed to choose between call and put option after one year, depending on the up and down states (head and tail respectively), which option do you choose if you are in the up state and which option do you choose if you are in the down state. Consider the strike for this option is 100. Show all calculations.

Your firm has been appointed for the first time to carry out the audit of Teejan Enterprises for the
year ending December 31, 2019. The entity is engaged in trading of office furnitures and operates
from 6 branches in various cities. Teejan Enterprises has been in operation for nearly 8 years and was
far bigger now than when it first started by its original owners. Teejan was originally owned by two
people who became husband and wife. As the years went by, they allowed three more friends to co-
own the business and the business soon become the size it is now. However, as the enterprise
becomes bigger, owners found it difficult to manage some basic areas of the business particularly the
control aspect. They simply don’t have the ability and could not find the right manager to handle all
six branches. As part of your initial assessment, you noticed significant adjustments in their
inventories. You communicated with their previous auditors and they revealed that those adjustments
in inventories were due to the un-reconciled balance of physical count of inventories. Moreover, you
also learned that two of the 6 branches will be closing down the following year. Recently, the
company directors are having closed-door meetings with a major competitor about merger and
acquisition. They are considering selling Teejan to a much bigger company. The management
expects the auditor to report on weaknesses in design and implementation of internal controls as well
as give some consultation advise on the management aspect on top of the usual audit of the financial
statements.
Required: Discuss matters that you would consider in developing the audit strategy for Teejan
Enterprises.

Financials This section will offer a financial overview of Basket of Goodies as it relates to the marketing activities. Break-even analysis, sales forecasts, and expense forecasts will all be addressed. 4.1 Break-even Analysis The Break-even Analysis indicates that $5,600 will be needed in monthly revenue to reach the important break-even point.Sales Forecast The first month will be spent setting up the business. It is unlikely that there will be much sales activity. In addition to dealing with some legal and accounting issues, equipment will need to be purchased, an office created, and an assembly room/inventory room set up in the basement. Susan will also be developing a system for assembly (work flow processes) within the first month. Susan will also be working on having the Website designed and set up. This will require a bit of time spent with her Web designer to perfect the look and feel of the site as well as to set up BOG as an online e-commerce merchant. Susan plans to use 1st-At-The-Top.com Internet and Ecommerce Consulting, www.1st-At-The-Top.com, to design her secure Website, and assure strong search engine placement on the Internet. Month two - three will begin to see some sales activity. BOG recognizes that it will take a bit of time to really ramp up the sales. Susan will be doing a lot of networking in an attempt to spread awareness about BOG's products and services. Because Susan's husband will be helping out with picking up some of the materials, Susan will not need an employee until near the end of year one.

Question: Discuss the financial information and budgets

the antimarino aircraft corp is considering the following two mutually exclusive investment options:

1) annuity revenues each year will be $100. total costs(fixed costs + variable costs) will be $80 each year. ( for simplicity assume there is no depreciation expense. initial net working capital requirements are $20 at start up, and will not grow. the firm will make a capital expenditure of $250 at startup and have annual expenditures of $10 at the end of each year. the project will last 20 years. the firm will have $200 dollars of debt and $200 dollars of equity.

2) growing perpetuity- revenues in the first year will be $100. revenues will grow at 5% per year. total costs will be $80 in the first year and will also grow by 5% per year ( assume no depreciation expense). initial net working capital requirements are $20 at startup and will grow by 5% per year. the firm will make a capital expenditure of $250 start up, plus annual expenditures of $10 at the end of the first year and will grow by 5% per year. the firm will have $300 of debt and $100 of equity.

Regardless of which option they choose, the following facts will hold true:

cost of debt = 7% beta = 1.2

tax rate =25% t note rate =3% market return =14%

which project should they choose?