A non-dividend-paying stock currently sells for $100 per share. The risk-free rate is 8% per annum and the volatility is 13.48% per annum. Consider a European call option on the stock with a strike price of $100 and the time to maturity is one year. a. Calculate u, d, and p for a two-step tree. b. Value the option using a two-step tree. Verify your results with the Option Calculator Spreadsheet.

Perfect Properties have collected sales data from property sales in the northern suburbs of Cape Town for the past month. In the table below you are supplied with the selling price (SP) of the house in Rand, the size of the plot in m² (P) as well as the size of the house, also in m² (H). They are interested in understanding which of these two factors influence the selling price.

Use the data in the sheet named “Perfect” and answer the following questions:

1. Decide which linear regression model (with size of plot (P) or size of house (H) or both as independent variable) is the better model in explaining the behaviour of selling prices (SP) and motivate your selection.

The remaining answers must be based on the model that you have selected.

2. What is the total variation in “Selling Price” that is explained by the independent variable(s) that you have selected?
3. Is the overall regression model statistically significant? Test at the 5% level of significance using the model that you have selected in a. For this test formulate the appropriate null and alternative hypothesis, determine the region of acceptance, use the appropriate test statistic and draw the statistical and management conclusions.
4. Write down the linear regression equation in algebraic format using SP for Selling price, P for plot size and H for the size of the house.
5. Compute the expected Selling price for a house that stands on a plot of 1500 m² and has a house that covers 245 m².

Compute the 95% confidence interval of the mean expense for a house that stands on a plot of 1500 m² and has a house that covers 245 m².

1. Your client is 64 years old. He tells you that his portfolio is currently 100% stock and he plans on keeping it that way for his entire life. Explain to your client the problems with his approach, describe a better solution, and explain to your client why your solution is better.

2. Mr. Kent is 62 and just received a letter in the mail from the Social Security Administration stating that he is now eligible to receive his benefits. Discuss the benefits and drawbacks of claiming Social Security benefits at age 62.

3.Mrs. Lane just lost her husband. They were both retired at the time. Mrs. Lane never held a full-time job. She would like you to explain what will happen to her Social Security benefit now. The total benefit for the Lanes was $3,000 per month ($2,000 for Mr. Lane, $1,000 for Mrs. Lane) before Mr. Lane passed.

4.Discuss the basic premise of a reverse mortgage, and describe how you might address a client’s concerns about using such a product.

5. Your client is nervous. She wonders why you are taking so much risk with her money by having 20% allocated to equities when she is already retired. Explain to your client why you are taking this risk.

Your friend has $1000 that he wants to invest toward his retirement in about 30 years. This will be his first ever investment. What is the best choice?

In 1980, a stock with the ticker symbol "MBA" would trade on which exchange, the New York Stock Exchange (NYSE) or Nasdaq? How about in 2014?

Why is margin required in a short sale stock transaction?

Assume A Corp, B Corp, and C Corp are components of the Dow Jones Industrial Average (DJIA). Given the information below, which would have the most influence on price movements of the DJIA?

A trader wants to purchase Microsoft stock at $30.00 and no more. Microsoft's current price is $30.05. Which order is most appropriate for this trader?

Which of the following best describes the stock trading environment in the United States?

Which of the following represents an advantage of an ETF versus an open-end mutual fund?

Suppose the market demand for dolls is given by the following equation:

Qd = 100 - 1.5xP + 0.6xP(sub) - 0.4xP(comp) + 8xInc, where Qd = number of units (dolls) demanded per period P = price per doll P(sub) = the price of a substitute good P(comp) = the price of a complement good Inc = an index of consumers income At present P = $10, P(sub) = $5, P(comp) = $15, & Inc = 41. As a result the income elasticity of demand is equal to:

A firm's total cost of producing Q units of output is C (Q) = 79 + 20Q. The inverse demand curve for the firm's product is P(Q) = 100-Q, where P denotes the price of the product.

a) If the price of the product is set equal to the firm's marginal cost, what profit will the firm earn?

b) If the firm charges a two-part tariff (a fixed fee plus a per unit price), how large is the fixed fee? How large is the deadweight loss?

Question 19 In a perfectly competitive market, a firm may have losses in the short run. Suppose the firm’s total costs are $1,000 and fixed costs are $200 when outputs are 100. The market-determined price of the good is $9 per unit. Which of the following statement is true?

a. The price is less than the average variable cost

b. The firm should shut down business

c. The firm should continue doing business

d. The price is less than average fixed cost

Our company prepared a Master Budget for planning purposes before the beginning of the year. That budget was for unit sales of 32,000 chairs at a budgeted price of $100 per chair.
Actual sales for the period were 30,000 units totaling $2,910,000. T
What was the total sales budget variance?
How much of the sales budget variance is attributable to a difference in sales price (the Sales Price Variance)?
How much of the sales budget variance is attributable to the difference in sales volume (Sales Volume Variance?