Consider the following two demand segments: 120−4Q = P and 100−4Q = P assuming there’s a constant marginal cost to serving either group, C(Q) = 60Q.

1. Find the optimal price, quantity and profits when the firm is able to practice third degree price discrimination.

2. Find the optimal price, quantity and profits when the firm is unable to practice third degree price discrimination.

3. Compute the price elasticity of demand associated with each optimal monopoly output in each segment. Do these results match what we would expect?

True or False

1.The Cross-Price elasticity of demand for good X is -2, if its demand changes from 100 units to 300 units, because of an increase in Price of Good Y from $1 to $2?

2.If the Demand for a good is inelastic, we can say that, as Price decreases, the Total Revenue will decrease.

3.If the demand for a good rises, when income falls, the good is an inferior good.

4.Because of the law of supply, we can be sure that price elasticity of supply, which measure the responsiveness of quantity supplied to a change in market price of the good, will always be NEGATIVE.

A 5-year, 6% annual-compounding bond priced to yield 8%.

a. Calculate the Macaulay duration of the bond.

b. Calculate the bond price.

c. Calculate the modified duration of the bond.

d. According the modified duration, what is the estimated bond price if the market yields decline to 7%?

e. Using financial calculator, calculate the actual bond price if rate does drop to 7%?

f. How does the actual bond price compare to the price predicted by the modified duration? Explain the reason for the difference.

g. Find the effective duration using 100 basis points change in interest rate.

Demand is projected to be 600 units for the first half of the year and 900 units for the second half. The monthly holding cost is $2 per unit, and it costs $55 to process an order. Assuming that monthly demand will be level during each of the six-month periods covered by the forecast (e.g., 100 per month for each of the first six months), determine an order size that will minimize the sum of ordering and carrying costs for each of the six-month periods.

You are the employed by the First National Bank. This bank has $5 million in capital. They have $100 in checkable deposits. Of that they keep only the 10% required reserves and loan the rest out. In $45 million in business loans and $50 million in residential mortgages. How well capitalized is First National Bank? Calculate the risk weighted level of assets and risk weighted leverage ratio. Why are leverage (capital) ratios important for financial regulators and institutions?

You are the employed by the First National Bank. This bank has $5 million in capital. They have $100 in checkable deposits. Of that they keep only the 10% required reserves and loan the rest out. In $45 million in business loans and $50 million in residential mortgages. How well capitalized is First National Bank? Calculate the risk weighted level of assets and risk weighted leverage ratio. Why are leverage (capital) ratios important for financial regulators and institutions?

A gradient payment series is received monthly for 20 years and deposited into an account. The first payment is $2,000 and the gradient factor is $100 per month. What is the balance in the account after the initial 20 years? AFTER the first 20 years, the gradient factor is then doubled for an additional 10 years. At an interest rate of 6% compounded monthly (throughout the 30 years). What is the balance in the account after the last payment is deposited at the end of the 30th year?

1. A project has a total up-front cost of $435.44. The cash flows are $100 in the first year, $200 in the second year, and $300 in the third year. What’s the IRR? If we require an 18 percent return, should we take this investment?

A lot of 100 items contains 10% which are defective and 90% nondefective. Two are chosen at random. Let A = {the first item non defective}, B = {the second item non defective}. Find P(B) and show P(B) = P(A). Why is this?

You are given the sample mean and the population standard deviation. Use this information to construct the​ 90% and​ 95% confidence intervals for the population mean. Interpret the results and compare the widths of the confidence intervals. If​ convenient, use technology to construct the confidence intervals. A random sample of 60 home theater systems has a mean price of ​$118.00. Assume the population standard deviation is ​$19.60. Construct a​ 90% confidence interval for the population mean.

The​ 90% confidence interval is ​( nothing​, nothing​). ​(Round to two decimal places as​ needed.)

Construct a​ 95% confidence interval for the population mean.

The​ 95% confidence interval is ​( nothing​, nothing​). ​(Round to two decimal places as​ needed.)

Interpret the results. Choose the correct answer below

A. With​ 90% confidence, it can be said that the population mean price lies in the first interval. With​ 95% confidence, it can be said that the population mean price lies in the second interval. The​ 95% confidence interval is wider than the​ 90%.

B. With​ 90% confidence, it can be said that the sample mean price lies in the first interval. With​ 95% confidence, it can be said that the sample mean price lies in the second interval. The​ 95% confidence interval is wider than the​ 90%.

C. With​ 90% confidence, it can be said that the population mean price lies in the first interval. With​ 95% confidence, it can be said that the population mean price lies in the second interval. The​ 95% confidence interval is narrower than the​ 90%.