Suppose that we buy an asymmetric butterfly on a stock using
calls with strike prices 40, 47.50, and 60. We denote the price of the call option with strike
price K by C(K). We assume that we can trade options for a number of shares that can be
any positive integer (and not necessarily a multiple of 100). Suppose that C(40) = 11.45,
C(47.50) = 7.00, and C(60) = 2.08.
Let the number of options used be N(K) for the strike price K. We assume that each option
is for one share; we completely ignore the comcept of a contract in this problem. We take
N(K) to be a positive integer no matter whether the options are bought or sold.
(a) Are the options for strike price 40 bought or sold ?
(b) Are the options for strike price 47.50 bought or sold ?
(c) Are the options for strike price 60 bought or sold ?
(d) Suppose that each N(K) is a positive integer and that we choose the numbers
N(K) to be as small as possible. Determine N(40), N(47.50), and N(60). There is only one
correct answer.
(e) What is the total (net) amount that we pay for this butterfly ?
(f) If T = 1/2 (6 months), if the risk-free interest rate r = 0.05, and if the stock
price ST = 58.50 at expiration, what is our profit for this transaction (expressed as a real
number, which is negative if, and only if, we have a net loss) ? We use the number of shares
given in part (d) above.

I am learning about Options, futures and hedges in my upper division finance class and I am struggling to figure out a part of options. What stops someone from from buying a call option at a lower price and turning it around and selling it at at higher price for profit?

what I mean by this is for example, the current price of a stock is $100/share and you enter a call option contract on 1/1/18 with a strike price of $150/share with a premium of $5/share. the expiry is on 4/16/18. on 4/16/18, the current market price for the stock is $200/share

what stops someone from entering that contract, then on the expiry date, buying and then turn around and selling it right away at the $200 market price, gaining a $45/share profit after taking out the premium? Is there some type of law stating you have to hold onto those shares for a certain amount of time? Or am I completely misunderstanding the concept all together? Because if that IS how it works, then it would essentially be risk-free trading right? besides losing the premium on a bad call and letting it expire, youre guaranteed to make money if you take advantage of the call price.

When I asked my professor, he didnt answer it, rather he worked around the question and all I got out of it was time value of money, which is a concept I have learned in the past but have yet to go over in this class

2. AMC Corporation currently expects to generate $40 million free cash flows each year forever, and it currently has $100 million cash. Its cost of capital is 10%. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchase shares. After the share repurchase, news will come out that will change AMC’s free cash flow each year will be either $60 million or $20 million.

a.What is AMC’s share price prior to the share repurchase?

b.What is AMC’s share price after the repurchase if its firm value goes up? What is AMC’s share price after the repurchase if its firm value declines?

c. Suppose AMC waits until after the news comes out to do the share repurchase. What is AMC’s share price after the repurchase if its firm value goes up? What is AMC’s share price after the repurchase if its firm value declines?

d. Suppose AMC management expects good news to come out. Based on your answers to parts b and c, if management desires to maximize AMC’s long term share price, will they undertake the repurchase before or after the news comes out? When would management undertake the repurchase if they expect bad news to come out?

e. Given your answer to part d, what effect would you expect an announcement of a share repurchase to have on the stock price? Why?

Python 3

A simple way to encrypt a file is to change all characters following a certain encoding rule. In this question, you need to move all letters to next letter. e.g. 'a'->'b', 'b'->'c', ..., 'z'->'a', 'A'->'B', 'B'->'C', ..., 'Z'->'A'. For all digits, you need to also move them to the next number. e.g. '0'->'1', '1'->'2', ..., '9'->'0'. All the other symbols should not be changed.

1. Write a function encrypt with the following requirements:

• the function takes a string argument, which is a file name.
• read the csv file.
• replace all characters uisng the rule above.
• write the content to a new file named "encrypted.csv".

2. Call the function with the file name "business-price-indexes-june-2020-quarter-csv-corrected.csv"

--2020-10-16 19:32:31-- https://www.stats.govt.nz/assets/Uploads/Business-price-indexes/Business-price-indexes-June-2020-quarter/Download-data/business-price-indexes-june-2020-quarter-csv-corrected.csv Resolving www.stats.govt.nz (www.stats.govt.nz)... 45.60.11.104 Connecting to www.stats.govt.nz (www.stats.govt.nz)|45.60.11.104|:443... connected. HTTP request sent, awaiting response... 200 OK Length: 11924606 (11M) [text/csv] Saving to: ‘business-price-indexes-june-2020-quarter-csv-corrected.csv’ business-price-inde 100%[===================>] 11.37M 4.56MB/s in 2.5s 2020-10-16 19:32:34 (4.56 MB/s) - ‘business-price-indexes-june-2020-quarter-csv-corrected.csv’ saved [11924606/11924606]

1. A single firm monopolizes the entire market for single-lever, ball-type faucets which it can produce at a constant average and marginal cost of AC=MC=10. Originally, the firm faces a market demand curve given by Q=60 – P

1. Calculate the profit-maximizing price and quantity combination for the firm. What is the firm’s profit?
2. Suppose the market demand curve shifts outward and becomes steeper. Market demand is now described as Q=45-0.5P. What is the firm’s profit maximizing price and quantity combination now? What is the firm’s profit?
3. Instead of the demand function assumed in part b, instead that demand shifts outward and becomes flatter. It is described by Q=100-2P. Now what is the firm’s profit-maximizing price and quantity combination? What is the firm’s profit?
4. Graph the three different situations in parts a, b, and c (using 1 graph). Based on what you observe, explain why there is no supply curve for a firm with monopoly power

Assume you have only three goods to choose from:

• Good “A” Price is $10.00 per unit
• Good “B” Price is $12.00 per unit
• Good “C” Price is $3.00 per unit

Also assume you have $76.00 of income to spend and have the following marginal utility expectations for the goods.

Complete the table by computing the MU/P for each good and deciding how you, a rational consumer would spend their budget.

How much of each good would you purchase if your income rose to $116?

Suppose there are two firms making the same product. The demand curve for the product is Q = 500 - 5P. Suppose both firms have to select how many items they make at the same time. Once they produce they make the items, they take them to market and sell them for the market clearing price. Assume both firms have the same cost function C = 100 + 10q. What is the optimal output for each firm? What is each firm's profit and market clearing price?

Suppose Firm 1 gets to go to market 1^st in the above example. What are the new solutions for optimal quantity, market price, and profit?

Suppose, Firm 2 has a cost curve that is 200 + 10q. Does your answer for #1 change? Why or why not? If it does, resolve #1.

Suppose Firm 2 has a cost curve that is 200 + 20 q. Does your answer for #1 change? Why or why not? If it does, resolve #1.