From a random sample of 48 days in a recent year, US Gasoline prices had a mean of $2.34 and a standard deviation of $0.30. Use this information to construct the following confidence intervals and determine the margin of error for each:

a. 90%

b. 95%

c. 99%

Trefor, a US firm, has a sterling (£) receivable of £300,000 from a UK customer due one year from now. Trefor has no use for sterling currency and will exchange the receipt into US dollars ($). The spot exchange rate now is £1=$1.34 and the one-year forward exchange rate is £1=$1.31. Assume the forecasted spot rate in one year’s time is £1=$1.28 or £1=$1.38, with equal probability. The discount rate is zero.

(a) What is the expected dollar value of Trefor’s receivable if it chooses:

(i) not to hedge the receipt?

(ii) to use a forward hedge?

(b) One year sterling put options and sterling call options are available at a cost of $0.03 per £ with an exercise price of £1.32.

(i) How could Trefor make use of an option hedge for its sterling receivable?

(ii) What will be the expected value in dollars of the outcome of the option hedge?

(c) If Trefor is concerned only about downside risk, is it better to choose the forward hedge or the option hedge? Explain. (60 words)

(d) An alternative hedging strategy for Trefor is to use futures contracts. Are there any advantages to using futures instead of a forward exchange extract? Explain. (60 words)

(e) Briefly discuss the implications of the Capital Asset Pricing Model for the relationship between the current spot price of an asset and the discount offered by the seller of a futures contract. (100 words)

Does immigration affect wages and jobs in the US? Are Americans hurt by immigration from countries that offer cheaper labor? Does immigration increase crime and cost the taxpayers money?

Consider the US market for vaccines. Vaccines prevent the consumer of the vaccine from getting viral infections and also reduce the risk of other people getting infections. Construct a graph that describes the vaccine market in the US (numbers are not necessary). Make sure to label the axes and show the following elements:

a. The private marginal cost (PMC) curve for vaccines

b. The private marginal benefit (PMB) curve for vaccines

c. The social marginal cost curve (SMC) for vaccines

d. The social marginal benefit (SMB) curve for vaccines

e. Identify the quantity and price of vaccines in a competitive market equilibrium (i.e. a free market without government regulation) as QM and PM

f. Identify the socially efficient quantity of vaccines as QS and explain why you feel this quantity maximizes social welfare in the vaccine market.

g. Shade in the area that corresponds to the deadweight loss if the quantity of vaccines is QM instead of QS

h. Does the market produce too many or too little vaccines? Why?

A US multinational received an order for airplane parts from Australia for delivery in one year. The total invoice is A$1,000,000 and payable in six months. The expected spot prices to prevail in six months range from $0.55 to $0.85. The following information is available:

Spot rate                                  $0.70/AUD
6-month forward rate           $0.68/AUD.
Interest rate in US4.00%
Interest rate in Australia8.00%
Call option premium$0.12E=$0.70
Put Optionpremium$0.10 E=$0.70

1. How can the firm hedge using forward rates? Show the payoffs for the expected spot rates.
2. How can the firm hedge using money market rates? Show the payoffs for the expected spot rates.
3. How can the firm hedge using options. Show the payoffs for the expected spot rates.
4. Which hedging would you recommend?

The following is average weekly per pound price data for apple pears in the US (from usda.gov) starting May. Your employer wants you to determine forecasted average weekly price for all the weeks starting in May.

1. For each period starting in May (through August 6), determine the forecasted values (round all responses to two decimal places) using:
   1. Naïve previous period
   2. Four-period moving average
   3. Four-period weighted moving average (w₁=0.35, w₂=0.3, w₃=0.25, w₄=0.10).
   4. Exponential smoothing with an α= .35. Make the assumption that the forecasted value of May 20 is equal to the actual value of May 20.

To receive any credit for filling out the above table, you must show your hand written work on attached pages. You should also double check your work using Excel (Excel for forecasting won’t be graded).

2. For the last four periods in the month of July (includes: July 8, July 15, July 22, and July 29),
   1. calculate MAD, MSE, and MAPE (ok to use Excel here), and fill out the following table

2. Which forecasting technique do you recommend the company uses? Justify your response.

Do you agree with the change in US GAAP from purchase and pooling of interest methods to the acquisition method? What are a few advantages and disadvantages?

Let us assume that from a population with mean ?=100 and standard deviation ?=15 a sample random variable of ?=900 is selected.
a. What is the probability ?(?̅<101.1)?
b. What is the probability ?(?̅>101.5)?
c. What is the probability ?(99.3<?̅<100.5)?