1) Baltimore Furniture Inc. owns two factories, each of which produces three types of tables – the deluxe, medium and the standard. The company has a contract to supply tables to a newly built hotel in downtown Washington DC comprising of at least 12 deluxe tables, 8 medium tables and 24 standard tables. Each factory produces a certain number of tables during each hour it operates. Factory 1 produces 6 deluxe tables and 2 medium tables. Factory 2 produces 2 deluxe tables, 2 medium tables and 12 standard tables. It costs Baltimore Inc. $150 per hour to produce each table in factory 1 and it costs $120 per hour to produce each table from factory 2. The Company wants to determine the number of hours it needs to operate each factory so that it could meet up with its contract at the lowest cost. Hints: You are required to minimize cost assuming that factory 1 = X and factory 2 = Y.

a. Formulate a linear programming model for this problem. (15 points)

b. Represent this problem on a graph using the attached graph paper. Show the feasible region. (10 points)

c. Solve this model by using graphical analysis showing the optimal solution and the rest of the corner points as well as the costs.

•South Park Energy is considering replacing the company's Methane Plant with a Nuclear Plant.

•The Methane Plant was built two years ago at a cost of $120M with an expected useful life of 5 years. This plant is being depreciated to zero using 5-year straight-line depreciation. The Methane Plant can be sold today for $70M. If this plant had been kept, it would have had no salvage value at the end of its expected useful life three years from today.

•The Nuclear Plant would cost $500M to build today. Since the Nuclear plant will just be a working prototype, its expected useful life is only 3 years and it falls in the 3-year MACRS depreciation class (yr 1: 33%, yr 2: 45%, yr 3: 15%, yr 4: 7%). The Nuclear Plant is expected to have a salvage value of $40M at the end of the plant's 3-year life. The Nuclear Plant is expected to reduce operating expenses by $150M each year during the plant's 3-year expected life and increase revenues by $40 million each year. The company's marginal tax rate is 40%, and this project has a weighted average cost of capital of 13%.

(Q1) What is the total cash flows during year 3 for this replacement analysis?

(Q2) What is the initial cash flow for this replacement analysis?

Determine the difference between the following interest rates, if they were all used as yearly rates. In your dropbox submission calculate each rate out, and rank them from highest to lowest. In the answer box below, enter the absolute value difference between rate 1 and 4 (entered as %, so 0.2% would mean just enter "0.2" below).

Rate 1: 5.73% nominal yearly, compounded daily

Rate 2: 5.73% nominal yearly, compounded monthly

Rate 3: 5.73% nominal yearly, compounded yearly

Rate 4: (5.73% + 0.2%*) yearly

*(note for example if your problem reads 5% + 0.2% yearly this means 5.2% yearly)

Please give answers of the following questions:

1. What are the strengths and limitations of using estimates of total economic value to

develop environment policy recommendations? How does your answer relate to your

worldview (anthropocentric or ecocentric)?

2. Do you think contingent valuation should be widely used as a tool for developing environmental policy recommendations? What do you think is the main strength of CV?

What do you think is its main weakness?

3. Suppose that you are asked to conduct a cost-benefit study of a proposed coal-fired

power plant. The plant will be built on the outskirts of a residential area and will emit a

certain volume of pollutants. It will require a substantial amount of water for its cooling

system. Industries in the region argue that the additional power is urgently needed, but

local residents oppose construction. How would you evaluate social and environmental

costs and weigh them against economic benefits?

4. As mentioned in the text, under U.S. law federal agencies must use cost-benefit analysis to evaluate major policy proposals. Do you agree with this requirement, in particular for environmental policies? How much weight do you believe should be given to the results of cost-benefit analyses when making policy decisions? Discuss how economic, health, and environmental criteria should be balanced in formulating regulations.

5. Suppose that the government of a developing country is considering the establishment of a national park in a scenic forested area. Local opposition arises from those who wish to use the forest land for timbering and agriculture. But the national park would draw both local and foreign visitors as tourists. Could cost-benefit analysis aid the decision on whether to establish the park? What factors would you consider, and how would you measure their economic value?

6. In what respects is “natural capital” similar to human-made capital, and in what respects does it differ? We often speak of a “return to capital,” meaning the stream of income generated by a capital investment. Can we speak of a return to natural capital? What are examples of investment in natural capital? Who is motivated to make such investments? Who would suffer if such investments were not made, or if “disinvestment” occurs due to resource depletion or environmental degradation?

7. Is the concept of optimal scale for an economy useful? If so, how would you go about

determining it? Do you think that economies such as those in the United States, Europe,

and Japan have reached optimal scale? Exceeded it? How about the economies of Latin America, Asia, and Africa? How would you relate the concept of optimal scale in the global economy to economic growth in national economies at different levels of development?

8. Distinguish the concepts of strong and weak sustainability, and give some practical examples, other than those cited in the text, for their application. Where is each concept most appropriate? Which economic policy measures are relevant to achieving sustainability?

25. A coupon bond is a bond that _________.

A) pays interest on a regular basis (typically every six months)

B) does not pay interest on a regular basis but pays a lump sum at maturity

C) can always be converted into a specific number of shares of common stock in the issuing company

D) always sells at par

26. Callable bonds

A) are called when interest rates decline appreciably.

B) have a call price that declines as time passes.

C) are called when interest rates increase appreciably.

D) A and B.

E) B and C.

27. A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of 6.2%. A bond issued by Ford Motor Company due in 5 years has a yield of 7.5%; a bond issued by Shell Oil due in one year has a yield of 6.5%. The default risk premiums on the bonds issued by Shell and Ford, respectively, are

A) 1.0% and 1.2%

B) 0.7% and 1.5%

C) 1.2% and 1.0%

D) 0.8% and 1.3%

E) none of the above

28. A coupon bond that pays interest annually is selling at par value of $1,000, matures in 5 years, and has a coupon rate of 9%. The yield to maturity on this bond is:

A) 8.0%

B) 8.3%

C) 9.0%

D) 10.0%

Question 3

CABCo operates an absorption costing system and sells three products B, R and K which are substitutes for each other. The following standard selling price and cost data relate to these three products:

                   Products Selling price        Direct material/unit           Direct labour/unit

B                         GHS14.00           3 kgs @ GHS1.80/kg          0.5 hours @ GHS6.50/hour

R                         GHS15.00           1.25 kgs @ GHS3.28/kg    0.8 hours @ GHS6.50/hour

K                          GHS18.00           1.94 kgs @ GHS2.50/kg    0.7 hours @ GHS

Budgeted fixed production overhead for the last period was GHS81,000. This was absorbed on a machine hour basis. The standard machine hours for each product and the budgeted levels of production and sales for each product for the last periods are as follows:

                        Product                                                              B                     R                    K

                        Standard machine hours per unit                  0.3hours       0.6hours       0.8hours

                        Budgeted production and sales (units)          10,000           13,500            8,500

Actual volumes and selling prices for the three products in the last period were as follows

                         Product                                                       B                       R                      K

Actual selling price per unit GHS14.50        GHS15.50       GHS19.00

      Actual production and sales (units) 9,500                 13,500              8,500

Calculate the following variances for overall sales for the last period:

1. Sales price variance
2. Sales volume profit variance
3. Sales mix profit variance
4. Sales quantity profit variance

A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts Asset Expected Return (%) Beta Residual Standard Deviation (%) Stock A 25 0.8 52 Stock B 19 1.2 61 Stock C 16 0.6 55 Stock D 12 0.7 47 Macro Forecasts Asset Expected Return (%) Standard Deviation (%) T-bills 8 0 Passive equity portfolio 18 26 a. Calculate expected excess returns, alpha values, and residual variances for these stocks. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round "Alpha values" to 1 decimal place.) b. Compute the proportion in the optimal risky portfolio. (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.) c. What is the Sharpe ratio for the optimal portfolio? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) d. By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely passive index strategy? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) e. What should be the exact makeup of the complete portfolio (including the risk-free asset) for an investor with a coefficient of risk aversion of 3.0? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

A portfolio manager summarizes the input from the macro and micro forecasters in the following table:

a. Calculate expected excess returns, alpha values, and residual variances for these stocks. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round "Alpha values" to 1 decimal place.)

b. Compute the proportion in the optimal risky portfolio. (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.)

c. What is the Sharpe ratio for the optimal portfolio? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

d. By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely passive index strategy? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

e. What should be the exact makeup of the complete portfolio (including the risk-free asset) for an investor with a coefficient of risk aversion of 3.0? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

I was stuck on the following review problem on hypothesis testing. Could you please guide me on how to approach this type of problem?

Stacy, a professional soccer player, had a field goal percentage (i.e., probability of making a shot) of p₀ = 60% before needing to take a season off to recover from an injury.

(a) Since returning to the game from injury, Stacy has made 13 out of n = 20 shots. Is Stacy's new, post-injury field goal percentage higher than her old percentage p₀? Perform a suitable one-sided hypothesis test and state your conclusion, taking α = 0.05.

(b) Suppose that the true new field goal percentage is p, where p ∈ (0.6, 1). If we perform a one-sided test as above and want to achieve a type-I error rate of 0.05 and type-II error rate of 0.025, what is the number of shots n needed since returning from injury? Provide an approximate formula as a function of p, and compute the values of n for each of p = 0.8, 0.7, 0.61 (Notice that if p is very close to 0.6 then you may need a very large number of shots.)

(c) Stacy scored X points in a high school game. Knowing that X is greater than 100, find X.

• • The risk-free rate in the US is 5% and the UK risk-free rate is 8%. The spot quote is $1.80/£ while the one year forward quote is $1.78/£. You can borrow either $1,000,000 or £555,556. According to IRP, is the forward quote correct? If not, what should it be?

If the forward quote is not correct, lay out the steps to implement an arbitrage.

• The annualized US risk-free rate is 8% and the Germany risk-free rate is 5%. Assume that any period rates less than a year can be interpolated (i.e. if you invested for 6 months then you would receive 4% in the US). The spot quote is €0.80/$ while the 3-month forward quote is €0.7994/$. You can borrow either $1,000,000 or €800,000. According to IRP, is the forward quote correct? If not, what should it be?

If the forward quote is not correct, lay out the steps to implement an arbitrage.

• A trader believes that the euro will appreciate versus the pound. Currently, the spot is €1.2/£ and the forward is €1.3/£. Lay out the steps that the trader would implement if she wants to potentially profit (using forwards) from her view.

What if spot finished at £0.8696/€

What if spot finished at £0.7143/€

• Below are quotes from JPMorgan
• Bid - Ask
• €/$ 0.8- 0.85
• £/$ 0.7- 0.75
• £/$

Calculate the £/€ quote. Explain what each trading desk at JPMorgan is doing so that the bank can arrive at that quote