1) Calculate the Intrinsic Value of each call option.

2) Calculate the Time Value of each call option.

3) Calculate the Intrinsic Value of each put option.

4) Calculate the Time Value of each put option.

5) If the stock sells for $72 at the expiration date of the preceding options, what are the profits and losses for the writers and buyers of these options?

Price controls (price floors and price ceilings) are a commonly used tool on behalf of governments to intervene in the way markets are operating.

Discuss whether price controls are an effective way to intervene to the market.

How is the use of price controls distorting the operation of markets?

Provide examples of countries that have used price controls to affect the way various markets operated.

Analyze both price floors and price ceilings.

e. Calculate Real GDP for 2007 and 2008 using the chain-weighted method.

f. Calculate the GDP deflator and inflation using Real GDP from part e.

1. Ocular Solutions recently (at the beginning of year 1) forecasted first year sales of $9.4 million, operating costs other than depreciation of $5.6 million, and depreciation of $0.6 million. The company has no amortization charges, it has $4.2 million of outstanding bonds that carry a 6.5% interest rate, and its income tax rate is 28%. In order to sustain its operations and thus generate sales and cash flows in the future, the firm is required to make $1.3 million of capital expenditures on new fixed assets and to invest $0.3 million in net working capital.

a) Calculate the FCF of the firm in the first year. [5 Marks]

b) Assuming that the firm’s FCF will grow at a rate of 3% forever after Year 1, and also that its WACC is 20.0%, estimate the market value of the firm and its debt ratio (Debt/Firm Value) at the beginning of year 1. [5 Marks]

c) If the company keeps the debt level unchanged in the future, estimate its debt ratio at the beginning of year 2, and beginning of year 3. [5 Marks] d) Discuss the potential problem when using the WACC method to answer parts b) and c) above.

2. American Hardware (AH), a national hardware chain, is considering purchasing a smaller chain, Eastern Hardware (EH). American Hardware's analysts project that the merger will result in incremental free cash flows and interest tax savings. In the first two years, the incremental FCF is $3 million each year and the value increases to $3.5 million each year after the period. The tax savings are $0.5 million annually starting from the first year. They have determined that the appropriate discount rate for valuing EH (for both FCF and interest tax savings) is 17 percent. EH has 7 million shares outstanding and AH has 56 million shares outstanding. EH's current share price is $14.25 and AH’s current share price is $28.25. a). What is the maximum price per share that AH should offer (under the condition that all of the proposed synergy value is distributed to the EH shareholders)? [6 marks] b). If the proposed synergy value is equally distributed between AH shareholders and EH shareholders (50% to all AH shareholders and 50% to all EH shareholders), what is the price per share that AH should offer? [7 marks] c). If AH has successfully purchased all of EH shares at the price of $18, what should AH share price be after the purchasing (assuming investors know the information precisely as described above)?

a). What is the maximum price per share that AH should offer (under the condition that all of the proposed synergy value is distributed to the EH shareholders)? [6 marks] b). If the proposed synergy value is equally distributed between AH shareholders and EH shareholders (50% to all AH shareholders and 50% to all EH shareholders), what is the price per share that AH should offer? [7 marks] c). If AH has successfully purchased all of EH shares at the price of $18, what should AH share price be after the purchasing (assuming investors know the information precisely as described above)?

b). If the proposed synergy value is equally distributed between AH shareholders and EH shareholders (50% to all AH shareholders and 50% to all EH shareholders), what is the price per share that AH should offer?

c). If AH has successfully purchased all of EH shares at the price of $18, what should AH share price be after the purchasing (assuming investors know the information precisely as described above)?

Draw a hypothetical demand and supply curves for egg cups in Canada, and then graph and explain the following events and how they affect the equilibrium price and quantity of egg cups in Canada.

1. A successful advertising campaign by egg cup producers.

2. Technological improvements in the production of egg cups.

3. An increase in the price of eggs a compliment in consumption.

4. An increase in the price of bird feed the main input in egg production.

5. An increase in the demand for waffles a substitute in consumption of eggs.

1. Unemployment  (show all work)

Suppose that country a population of 120 made up of a labour force of 100 and 20 children under the age of 15,

1. What is the participation rate.

Eight members of the labour force are unemployed

2. What is the unemployment rate?

Of the eight unemployed 2 worked in a factory that produced pies this factor has closed down and expected to open up after the pandemic.

3. Describe what type of unemployment this is and why.

One of the eight is a sky instructor and has been laid off for the summer

4. Describe what type of unemployment this is and why.

One of the unemployed cannot find a job and gives up looking

5. What is the new unemployment rate

2. Inflation (show all work)  

Name the two measurements of inflation discussed in class

            1)

            2)

Using 2012 as the base year (=100) calculate the inflation rate for 2013

What does currency depreciation mean?

Who is the only legal issuer of bank notes and coins in Canada?

A responsible government believes that the inflation rate is out of control, what fiscal policies could they enact?

4)  Economic Growth

Using 2017 as a base year, calculate;

1) The GDP deflator

2) Nominal Economic growth

3) Real economic growth

4) Give reasons why Real GDP per capita may overstate the well-being of a countries inhabitants?

5)   MATCHING

Match the terms on the right to the ones on the left by placing the appropriate CAPITAL letter on the space provided.  All the phrases are designed to fit; some may fit more than once.  In any case, provide only one answer for each term.  Illegible answers will be marked as wrong.

1. _____  easy money policy                            A.         increases competition

2. _____   M2+                                               B.         imports become cheaper  

3. _____  C $ depreciates                                C.         expansionary fiscal policy

4. _____  reduction in Gov. spending               D.         reduces competition

5. _____  non-tariff barrier                              E.         used to reduce inflationary pressures

6. _____  C $ appreciates                                F.         includes notice deposits of banks

7. _____  free trade                                        G.         tight fiscal policy

8. _____  tax reduction                                   H.         Exports become cheaper

9. _____   M 1                                                I.          interest rates fall

10. ____  tight money policy                             J.          currency plus demand deposits in banks

Alice wants to sell her Pokemon card collection on eBay. She decides to accept the first bid that exceeds 100$. Suppose that each bid that she receives is chosen uniformly at random between 0$ and 110$ (the bids are continuous, i.e., real numbers in that interval). Let X be the number of bids Alice receives (once she accepts a bid, the auction is over and she does not receive any more bids).

(a)Is X discrete, continuous, or neither?

(b)Find the expectation of X.

Please give me the journal entry for the first interest payment on each of the following bond issues:

1. We issued bonds at 102% with a par of $1,000 a life of 20 years with an interest rate of 10%

2. We issued bonds at 98% with a par of $1,000 a life of 5 years with an interest rate of 9%

3. We issued bonds at 100% with a par of $1,000 a life of 2 years with an interest rate of 8%

Don't forget to amortize the premium or discount.

Sweet Company’s outstanding stock consists of 1,300 shares of cumulative 5% preferred stock with a $100 par value and 10,300 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The total amount of dividends paid to preferred and common shareholders over the three-year period is: