3. What is the percentage change in price for a zero coupon bond if the yield changes from

9​%

to

6​%?

The bond has a face value of

​$1,000

and it matures in

16

years. Use the price determined from the first​ yield,

9​%,

as the base in the percentage calculation.

2. The following table reports the average prices of gasoline and apples, as well as the consumer price index for three years.

1. What was the percentage increase in the price of gasoline from 1995 to 2015? ______%
2. What was the percentage increase in the price of apples from 2005 to 2015? ______%
3. Did the relative price of gasoline rise or fall from 1995 to 2005? That is what was the percentage increase in gasoline prices higher or lower than the percentage increase in the CPI?

1. Lower

B     Higher

4. Did the relative price of gasoline rise or fall from 2005 to 2015?

1. Fall
2. Rise

5. Did the relative price of apples rise or fall from 1995 to 2005?

A. Fall

B Rise

Suppose we are analyzing the market for oranges in 2017. Graphically illustrate the impact of each of the following events on consumer or producer surplus. In 2017, Wildfires destroyed a majority of orange farms, reducing the orange production substantially, and what would be the impacts on consumer surplus? (Graphical analysis + Written discussions = at least 100 words) The price of apple, orange substitute, decreased in 2017. What would be the impacts on producer surplus? (Graphical analysis + Written discussions = at least 100 words)

The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2010, they buy 100 heads of cauliflower for $200, 50 bunches of broccoli for $75, and 500 carrots for $50. In 2011, they buy 75 heads of cauliflower for $225, 80 bunches of broccoli for $120, and 500 carrots for $100. a. Calculate the price of each vegetable in each year. b. Using 2010 as the base year, calculate the CPI for each year. c. What is the inflation rate in 2011?

There are two bonds in the market: Bond A is a coupon bond with a nominal value of $100, maturing in one year, with coupon of $5 paid every six months. Bond B is a six-month pure-discount bond which pays $100. Suppose that the annual interest rate is 5% compounded monthly.

(a)What is the non-arbitrage price of the bonds?

(b)Explain how to replicate a pure-discount bond maturing in one year, by using a combination of the bonds in the market.

4) Consider the following demand for barrels of pretzels: Q_D=100-2P+4P_Chips-2P_NachoCheese+Income

a. Are pretzels a normal or inferior good?

b. What kind of related good are chips?

c. What kind of related good is nacho cheese?

d. Let P_Chips =2, P_NachoCheese =2, and Income=100. What is the demand curve?

e. Let the quantity supplied of pretzel barrels be Q_S=-20+5P. Solve for the market equilibrium price and quantity.

What is the price of the following US T-Bond? (Use any method you prefer)

Face value: $100

Maturity: 7 years

Coupon rate 2.5% (paid annually)

Yield = 7.5%

Answer : 73.52

Suppose you observe that the above bond is trading at $83.00. What is the yield?

Yield:

Calculate the price, duration, and modified duration of this bond when the yield is 9% (Enter all answers with two decimal places).

Price:

Duration:

Modified Duration:

Suppose the yield for the bond from the previous question increases by 1½ percentage points. Without re-calculating the price, what is the expected change (in %) in the bond’s price? That is, what is the expected percentage change using the Duration approximation? What would be the new price predicted by (modified) duration?

Expected change:

New price:

1. A trader creates a long strangle with put options with a strike price of $160 per share, and call options with a strike of $170 per share by trading a total of 30 option contracts (15 put contracts and 15 call contracts). Each contract is written on 100 shares of stock. The put option is worth $13 per share, and the call option is worth $11 per share.

   1. What is the value of the strangle at maturity as a function of the then stock price?

   2. What is the profit of the strangle at maturity as a function of the then stock price?

Suppose the wholesale price of a certain brand of medium-sized eggs p (in dollars per carton) is related to the weekly supply x (in thousands of cartons) by the equation

625?2 −?2 = 100

If 25,000 cartons of eggs are available at the beginning of a certain week, and

(a)   if the price is falling at the rate of 2¢/carton/week, at what rate is the weekly supply changing?

(b)   if the weekly supply is falling at the rate of 1,000 cartons/week, at what rate is the wholesale price changing? Give your answer to the nearest tenth of a cent.