1. You own a bond that matures in 5 years, has annual coupons of 8%, and
whose par value is $100.
a. Calculate the duration of the bond if the YTM of the bond is 5%.
b. If there has been no change in the YTM of the bond, what is the duration of the bond after the fi4st interest payment is made when 4 years remain till maturity?
c. Several days after the interest was paid, the YTM of the bond fell from 5%
to 3%. Calculate the price change in percentage by calculating the price
before and after the change, as well as using the duration calculated in
question b.

a. Suppose a 7.2% semi-annual coupon 20-year Treasury issue with a par value of $100 issue is priced in the market based on the on-the-run 20-year Treasury yield. Assume further that this yield is 5.60%, so that each cash flow is discounted at 5.60% divided by 2. What is the market price of the Treasury issue based on this assumption?

b. Suppose also that the price of the same Treasury issue would be $115.285 if it is calculated based on the prevailing Treasury spot rate curve. What action would a dealer take and what would the arbitrage profit be? Can this situation persist in the long run?

a. Suppose a 7.2% semi-annual coupon 20-year Treasury issue with a par value of $100 issue is priced in the market based on the on-the-run 20-year Treasury yield. Assume further that this yield is 5.60%, so that each cash flow is discounted at 5.60% divided by 2. What is the market price of the Treasury issue based on this assumption? b. Suppose also that the price of the same Treasury issue would be $115.285 if it is calculated based on the prevailing Treasury spot rate curve. What action would a dealer take and what would the arbitrage profit be? Can this situation persist in the long run?

A five year bond, face value of 1,000 with a 6% semi-annual coupon is yielding 5.6%. It amortizes by paying 10% at the end of each year. Produce a table of cash flows for each payment date, showing coupon and principal separately. III The thirty-year US Treasury bond has a 2.5% coupon and yields 3.3%. What is its price?

A thirty-year corporate bond with a 4% coupon is priced at par. Is it possible for the corporate bond to have a higher price than the Treasury? How is the corporate bond’s “spread” quoted? Both bonds are 100 face and semi-annual

Suppose a monopoly has constant marginal costs of $20 per unit. Demand for the monopolist’s product is Q = 100 - P. Please show the work to receive the full credit.

i. What are the profit maximizing price and quantity for this monopoly?

ii. How many units of the product would the competitive market supply? What would the equilibrium price be?

iii. Calculate how much consumer surplus would be lost if this market started off as perfectly competitive but then became monopolistic.

iv. Calculate how much producer surplus would be gained if this market started off as perfectly competitive but then became monopolistic.

Suppose Bob is only willing to buy a bike seat if he can also buy a bike seat cover to go with it, i.e. Bob needs an equal number of bike seats and bike seat covers. Bob has $100 in income.

a. (10 points) Suppose bike seat covers cost $1 and bike seats cost $19. How many of each will Bob buy? Discuss and illustrate graphically.

b. (10 points) Suppose the price of bike seats increases to $49. How will Bob react to the price change? Discuss and illustrate on the same graph as in part a.

1. The following inventory data have been established for the Thompson Company:
   1. Annual sales are 338,000 units and orders must be placed in multiples of 100 units.
   2. The purchase price per unit is KES 600 and carrying cost is 20% of the purchase price of goods.
   3. Fixed order cost is KES 4,800.
   4. Three days are required for delivery while one year has 300 working days.

Required:

1. How many orders should Thompson Company place each year?
2. At what inventory level should an order be made?
3. Calculate the total cost of ordering and carrying inventories if the order quantity is EOQ.

An e-scooter seller has found out that his total cost curve is given by the formula TC = 100 + b³ - 15b² + 85b where b is the number of e-scooters produce.

1. Describe this technology in terms of increasing, decreasing, or constant returns to scale.

2. What would be the e-scooters seller´s profit maximizing level of output and how much profit will he earn if the price of an e-scooter is 90 Dollar?

3. What would be his profit maximizing level of output and how much profit will he earn if the price of an e-scooter is 25 Dollar?