This is a zero rates bootstraping question. Suppose there are three coupon bearing treasury bonds. The face value of all three bonds are $100. The first coupon payments for all three bonds will take place in 6 months. The first bond provides coupon at rate of 2% per annum semiannually and will mature in 1.5 years. The current price of the first bond is 98.8102. The second bond pays coupon at the rate of 2% per annum semiannually and will mature in 1 year. The current price for the second bond is 99.4954. The third bond pays coupon at the rate of 1 % per annum annually and will mature in 1.5 years. The price of the third bond is 97.8349. What are 0.5-year zero rate, 1-year zero rate, and 1.5-year zero rate, assuming the zeros rates are measured with continuously compounding? (Hint: using simultaneous equations to find the zero rates. You should have 3 equations with 3 unknown. This simultaneous equations system can be solved analytically.)

Some residents of Smoketown (population 100) like to smoke, but all of them dislike the bad smell generated by others peoples’ cigarettes. Each pack of cigarettes purchased by a resident causes 2 cents worth of damage to each of the 100 residents. Ten residents are willing to pay a up to $20 for their first pack of cigarettes a day, and $10 for their second, and twenty residents are willing to pay a up to $15 for their first pack of cigarettes a day, and $5 for their second. The rest of the population dislike smoking. The supply of cigarettes is perfectly elastic at a price of $9 per pack. If we impose a tax on cigarettes equal to the external cost of smoking them, what would be the total tax collected?

Can you draw a graph for this?

a. $0

b. $2

c. $10

d. $60

e. $80

Suppose that a 1 year zero coupon bond with a face of $100 sells at $94.34. While a zero 2 year sells at $84.99. You are considering the purchase of a 2 year maturity bond making annual coupon payments. The face value of the bond is $100 and the coupon rate is 12% per year.

1. What is the yield to maturity of the 2 year zero?

2. What is the yield to maturity of the 2 year coupon bond?

3. What is the forward rate for the second year?

4. According to he expectations hypothesis what are (1) the expected price of the coupon bond at the end of the first year and (2) the expected holding period return on the coupon bond over the first year?

5. Will the expected rate of return be higher or lower if you accept the liquidity preference hypothesis?

Can I get the answers to these with work shown? 2, 3, 4, and 5 only please.

1. The following two linear functions represent a market (thus one is a supply function, the other a demand function). Circle the answer closest to being correct. Approximately what will the quantity demanded be if the government controls the market price to be $1.50 (You must first find the market equilibrium price and quantity in order to see how the $1.50 relates to them)?

Q = 100 – 4.6P and Q = 75 + 6.2P

Qd=100-4.6P Qs=75+6.2P P=$1.50

Qd=Qs 100-4.6P=75+6.2P = 25=10.8P P=2.31

P=1.50 Qd=100-4.6P =100-4.6(1.5) =100-6.9 =93.1

2. There has been a change in the market (represented in 1 above). The change is represented by the following two equations. Circle the one correct conclusion that describes the market change.

Q = 85 + 6.2P and Q = 100 – 4.6P

3. Circle the function on the answer sheet that represents the marginal revenue (MR) function for this demand function: Q = 100 – 3P

4. Circle the quantity that maximizes total revenue (TR) for the marginal revenue (MR) function selected in number three (3).

5. If supply decreases and demand also increases, we can conclude that the new equilibrium:

Given the following:

Call Option: strike price = $100, costs $4

Put Option: strike price = $90, costs $6

How can a strangle be created from these 2 options? What are the profit patterns from this? Show using excel.

Amara Ltd was founded on 1st January 2019. Amara sells bed frames to customers. The company has adopted a periodic inventory system together with the average cost cost-flow assumption (AVCO) to determine the Cost of Goods Sold for the year. The company’s inventory transactions for its first year of operation to December 31st, 2019 are as follows:

Required:

(a) What amount will Amara Ltd report as its Inventory balance in the Current Asset section of its Balance Sheet? What amount will Amara report as Cost of Goods Sold for the year ended 2019 financial year? (Show all workings)

(b) If Amara Ltd had adopted First-In First-Out (FIFO) as its cost flow assumption on 1st January 2019, what Cost of Goods Sold figure would have been reported in its Statement of Financial Performance for the 2019 financial year? (Show all workings)

(c) Management is aware of another cost-flow assumption; Last-In First-Out (LIFO). Which of the three cost-flow assumptions; AVCO, FIFO or LIFO will yield the highest Gross Profit Margin for the 2019 year if 80% of Sales are on credit?

There is no specific methods required.

The RAND Health Insurance Study was set up to examine the effect of economic incentives on medical care demand. What were the major findings of this study? In your opinion, does this study validate entirely that higher costs for the individual will result in lower consumption when it comes to healthcare?

Straddle Example•

Current stock price = $100•Purchase at-the-money call (strike = 100) for $2

•Purchase at-the-money put (strike = 100) for $3

•What is the total value of your option portfolio for different stock prices(e.g. $120 or $85?)

4. Define first degree price discrimination, second degree price discrimination, and third degree price discrimination. Provide an example of each.

Describe the differences between price non-discrimination and (i) first degree price discrimination, (ii) second degree price discrimination, (iii) third degree price discrimination, and (iv) peak load pricing. Provide a supporting example in each of these four cases. Note the market structure conditions in which each can apply, and explain the expected welfare outcomes in each case.