Fill the following table:

b. Explain how price discrimination converts consumer surplus into economic profit.

A bond has 3 years to maturity, a 10% annual coupon and a par value of $100. The bond pays a continuously compounded interest of 7%. Suppose the interest rate goes down to 6%. What would be the percentage change in the price of the bond implied by the duration plus convexity approximation?

a. Fill the following table:  

b. Explain how price discrimination converts consumer surplus into economic profit.

A bond has 3 years to maturity, a 10% annual coupon and a par value of $100. The bond
pays a continuously compounded interest of 7%. Suppose the interest rate goes down to 6%. What
would be the percentage change in the price of the bond implied by the duration plus convexity
approximation?

The following table shows prices per $100 face value of default-free zero-coupon bonds:

Draw the yield curve. You may assume annual compounding.

a market has a demand curve p= 700- 2q. the supply curve for the market which is also the monopolists marginal cost curve is given by p= 100 + q. calculate the change in quantity, price, consumer surplus, and producer surplus going from a perfectly competitive market to a monopoly

Suppose that the current market interest rate is at 5% per annum in semi-annually compounding rate. A convertible bond issued by Study Inc has coupon rate of 5% per annum., a face value of £100, and time-to-maturity of 10 years. The coupon payment will pay to bondholders every 6 months. Bondholders may convert each unit of the bond into 100 shares of Study Inc shares at any time during the life of the bond. If the current stock price of Study Inc is trading at £10 per share, estimate the convexity of this convertible bond.

Assume the following model of the economy, with the price level fixed at 1.0:

C = 0.8(Y – T) i = 1000 – 20r

T = 500

G = 1,000

Ms = 1,000

Md/P = 0.5Y – 50ra

A) What are the short-run equilibrium values of Y, and r.

B) Assume that T decreases by 100. By how much will Y increase in short-run equilibrium?

C) Assume that T is back at its original level of 500, but Ms (money supply) increases by 100. By how much will Y increase in short-run equilibrium?

Suppose that the current market interest rate is at 5% per annum in semi-annually compounding rate. A convertible bond issued by Study Inc has coupon rate of 5% per annum., a face value of £100, and time-to-maturity of 10 years. The coupon payment will pay to bondholders every 6 months. Bondholders may convert each unit of the bond into 100 shares of Study Inc shares at any time during the life of the bond. If the current stock price of Study Inc is trading at £10 per share, estimate the convexity of this convertible bond.