Are the following items included in GDP? If they are not, briefly (1 sentence) explain why they are not.

1. Delta sells one of its existing airplanes to Korean air.
2. A California winery produces a bottle of Chardonnay and sells it to a customer in Montreal, Canada
3. An American buys a bottle of French perfume.
4. A college student buys pizza for dinner.

1. Nominal GDP in 2003                ________________
2. Nominal GDP in 2004                ________________
3. Real GDP in 2003                      ________________
4. Real GDP 2004                          ________________

D. Pizza King (PK) and Noble Greek (NG) are competitive pizza chains. PK believes there is a 30% chance that NG will charge $8 per pizza, a 50% that NG will charge $10 per pizza, and a 20% chance that NG will charge $12 per pizza. If PK charges price p1 and NG charges price p2, PK will sell 100 + 25(p2 – p1) pizzas. It costs PK $6 to make a pizza. PK is considering charging $7, $8, $9, $10, or $11 per pizza. To maximize its expected profit, what price should PK charge for a pizza? Please use Excel and include all formulas used.

Home’s demand curve for wheat is: D = 100 - 20P. Its supply curve is: S = 20 + 20P.

a) Derive and graph Home’s import demand schedule. What would be the price of wheat and quantity sold in Home in the absence of trade?

Now add Foreign, which has a demand curve: D* = 80 -20P and a supply curve S* = 40 + 20P.

b) Derive and graph Foreign’s export supply curve and find the price of wheat and quantity sold in Foreign in the absence of trade.

c) Now allow Foreign and Home to trade with each other. Find and graph the equilibrium under free trade. What is the world price of wheat? What is the volume of trade?

The Consumer Price Index (CPI) is the most popular indicator of inflation.  Consider the price and consumption data given below.

(a)     Using 2000 as the base year compute the value of the CPI for the years 2003 and 2004            (2000 = 100).

(b)     Briefly interpret your results using the CPI that you have calculated.

(c)     Compute the annual inflation rate for the years 2003 and 2004.

The yield to maturity on one-year zero-coupon bonds is currently 7 percent; the YTM on two-year zeroes is 8 percent. The federal government plans to issue a two-year-maturity coupon bond, paying coupons once per year with a coupon rate of 9 percent. The face value of the bond is $100.

1. At what price will the bond sell?
2. What will be the yield to maturity on the bond?
3. If the expectations theory of the yield curve is correct, what is the market expectation of the price that the bond will sell for next year?
4. If the liquidity preference theory is correct and you believe that the liquidity premium is 1 percent, what is the market expectation of the price that the bond will sell for next year?

You are considering buying an oil field. If you buy the field, you can extract the oil in one year. There are 100 barrels of oil that can be extracted from the field; the cost of doing so is $4,000. You expect the price of oil in one year to be $50/barrel. However, there are four equally likely prices of oil in one year: $20/barrel, $35/barrel, $40/barrel, and $105/barrel.

If your discount rate is 15%, how much are you willing to pay for the field? Assume the price of oil never changes after one year, and that you have the option to not drill if the price of oil is too low.

During its first year of operations, Silverman Company paid $12,625 for direct materials and $10,000 for production workers' wages. Lease payments and utilities on the production facilities amounted to $9,000 while general, selling, and administrative expenses totaled $4,500. The company produced 5,750 units and sold 3,500 units at a price of $8.00 a unit.

What was Silverman's net income for the first year in operation?

After winning some money at a casino, Tony is considering purchasing an annuity that promises to pay him $300 at the end of each month for 12 months, then $350 at the end of each month for 24 months, and then $375 at the end of each month for 36 months. If the first payment is due at the end of the first month and interest is 7.5% compounded annually over the life of the annuity, find Tony’s purchase price.

The team management of a jewlery store plans to buy gold in the future and seeks protection against an increase in the price of gold. The current price of gold is $352.40 per ounce. The futures price of gold is $397.80 per ounce. The number of ounces to be hedged is 1,000, and the number of ounces per futures contract is 100. Therefore, 10 contracts will be hedged.

1) Describe in detail the hedge created by the jewelry store. That is what actions would be taken and why?

2) Based on the information given in the question, describe the outcome in detail of this hedge if the price of gold is $304.20 per ounce and the price of the futures contract is $349.60 per ounce when the hedge is lifted.

3) Based on the information given in the question (not your answer above, but the original information), describe the outcome in detail of this hedge if the price of gold is $392.50 per ounce and the price of the futures contract is $437.90 per ounce when the hedge is lifted.

Any information as to how you came to the answer will be helpful as i am trying to understand the information. Thank you!