Based on the following information, is this good price elastic or price inelastic and is it income elastic or income inelastic. Explain your answer

The current price of the stock is $160. The put option price for these shares with an exercise price of 150 is $7 and the call option price is also $7 for those shares with the same maturity and exercise price of 180. · put option 1 for a week contract and call option contracts to purchase shares when selling answer the following questions.

1) In the expiry of the option, print out the gains and losses resulting from the above strategy.

2) Calculate the maximum profit and the maximum loss size and determine the range of share prices that occur respectively.

3) Find the stock price of the break-even.

Trace the execution of quicksort on the following array, assuming that the first item in each subarray is the pivot value. Show the values of first and last for each recursive call and the array elements after returning from each call. Also, show the value of pivot during each call and the value returned through pivIndex. How many times is sort called, and how many times is partition called? 55 50 10 40 80 90 60 100 70 80 20 50 22

The following code is provided in the textbook:

/** Implements the quicksort algorithm. */

public class QuickSort {

/** Sort the table using the quicksort algorithm. @pre table contains Comparable objects. @post table is sorted. @param table The array to be sorted */

public static > void sort(T[] table) { // Sort the whole table. quickSort(table, 0, table.length - 1); }

/** Sort a part of the table using the quicksort algorithm.

@post The part of table from first through last is sorted.

@param table The array to be sorted

@param first The index of the low bound
@param last The index of the high bound

*/

private static > void quickSort(T[] table, int first, int last) {

if (first < last) { // There is data to be sorted.

// Partition the table.

int pivIndex = partition(table, first, last);

// Sort the left half.

quickSort(table, first, pivIndex - 1);

// Sort the right half. quickSort(table, pivIndex + 1, last);

}

}

/** Partition the table so that values from first to pivIndex are less than or equal to the pivot value, and values from pivIndex to last are greater than the pivot value.

@param table The table to be partitioned

@param first The index of the low bound

@param last The index of the high bound

@return The location of the pivot value

*/

private static > int partition(T[] table, int first, int last) {

// Select the first item as the pivot value.

T pivot = table[first]; int up = first; int down = last;

do {

/* Invariant: All items in table[first . . . up - 1] <= pivot All items in table[down + 1 . . . last] > pivot */

while ((up < last) && (pivot.compareTo(table[up]) >= 0)) { up++;

}

// assert: up equals last or table[up] > pivot.

while (pivot.compareTo(table[down]) < 0) {

down--; }

// assert: down equals first or table[down] <= pivot.

if (up < down) {

// if up is to the left of down. //

Exchange table[up] and table[down].

swap(table, up, down);

}

}

while (up < down);

// Repeat while up is left of down. //

Exchange table[first] and table[down] thus putting the // pivot value where it belongs.

swap(table, first, down);

// Return the index of the pivot value. return down;

}

Fill in the blanks with the following numbers, not the words, for this and all the questions that follow. Jot them down so you won't have to keep scrolling up to the top to see what they are:

• Demand = 1
• Supply = 2
• Right = 3
• Left = 4
• Up = 5
• Down = 6

QUESTION 6

Suppose the dollar were to strengthen in international currency markets. That is, the price of the dollar, in terms of other national currencies, went up. This could have two effects on the American economy. First, the price of foreign products (as perceived by American consumers) would go A)________, and the price of American goods (as perceived by foreign consumers) would go B)________. Both of these phenomena would cause exports to go C)_________ and imports to go D)__________. In turn, the Aggregate E)_________ curve would shift to the F)________, causing output to go G)__________ and the price level to go H)________. On the other hand, however, foreign input prices (as perceived by American firms) would go I)___________. This would shift the Aggregate J)__________ curve to shift to the K)_____________ resulting in the level of output going L)__________ and the price level going M)__________.

The data in the table, from a survey of resort hotels with comparable rates on Hilton Head Island, show that room occupancy during the off-season (November through February) is related to the price charged for a basic room.

• First make a linear equation using linear regression on your calculator where x = price and y = occupancy rate.
• Convert occupancy rate to quantity of rooms in a 200-room hotel.
• Write down a revenue function for a 200-room hotel.
• What price per day will maximize the daily off-season revenue for a typical 200-room hotel? Use Calculus to determine the maximum.
• If this 200-room hotel has daily operating costs of $5510 plus $30 per occupied room. What price will maximize the daily profit during the off-season? Again use calculus to determine the maximum

More detailed instructions are given on page 690 of the textbook (12th edition).

Louis C.K. and other comedians try to subvert the Ticketmaster monopoly, there will be changes to the market for standup tickets. You will draw and explain this market conversion. In your first graph, begin with a market that is in monopoly as dominated by Ticketmaster. Depict the price and quantity (e.g. you’ll need a MR curve, a demand curve, MC/supply curve, and any consumer and producer surplus and deadweight loss). Then, in the next graph, depict the market as it becomes perfectly competitive. Depict how price and quantity change (e.g. this graph should display the monopoly price and quantity, then you should show the competitive price and quantity for comparison, as well as the new areas of consumer and producer surplus and deadweight loss). Make sure you’re clear on the graph and in your answer about what happens to price and quantity as the monopoly market is converted to perfect competition by Louis C.K.’s action (e.g. what increases, what decreases?). Also, make sure you make a clear statement about changes in efficiency (e.g. how consumer surplus, producer surplus, total surplus, and deadweight loss change)

Consider a hypothetical futures contract in which the current price is $82. The initial margin requirement is $5, and the maintenance margin requirement is $2. You go long 20 contracts and meet all margin calls, but do not withdraw any excess margin. The settlement price and spot price look like this:

1. Suppose you receive margin call at the beginning of the day, when your account is equal and less than maintenance margin. Which is the first day that you will receive margin call at the beginning of that day?

2. What is the total amount that you are going to put your account from day 0 to day 6?

3. What is the total loss and profit from day 0 to day 6, if the long holder always stays in the market?

Please do out work

Case 5.0: Incentives in the Firm – Compensating the CEO

Let’s work through an incentive concept and problem. “Moral hazard” problems arise when someone – the “principal” – hires an agent to do something, but the agent has an incentive to do something else. For example, firm owners may want their management team to maximize profits, but maximizing profits is hard, time-consuming work that could interfere with the management team’s preference for playing golf. If top management simply receives a salary, the problem is aggravated because the managers may not be motivated to satisfy the owners, and the owners can’t easily monitor management activity to know if they’re really doing a good job. The problem is resolved in large part if the owners tie most or all of management compensation to firm profits, as income is often a pretty good motivator (although some golf nuts will still pause for a while over this one.) We can set up a scenario to explore this incentive issue further, and this problem will also help fix in our minds the difference between maximizing revenue and maximizing profit.

A small firm faces an inverse demand function of P = 100 - Q. Its total cost function is given by TC = .5Q².   (You should see right away that marginal revenue is thus MR = 100 – 2Q, and it also happens that marginal cost is just MC = Q. Both MR and MC are the first derivatives of total revenue and total cost. And a quick comment on MC: unlike some marginal cost functions we’ve seen, this one is not constant, because marginal cost is getting $1 higher with each additional unit of output.)

The Chief Executive Officer will manage the firm, choosing output and price. Currently, the CEO is negotiating an incentive-based contract with the shareholders of the company. The CEO has proposed that she get 20% of the total revenue brought in by the firm. The shareholders' representative has counter-offered that 10% of total revenue be given to the CEO. (Hint: basing compensation on revenue will motivate revenue maximization rather than profit maximization!)

1.    How much income will each plan generate for the CEO and for the shareholders, respectively? (Hint: since both plans create incentives for the CEO to maximize revenue rather than profit, you should not set MR = MC at this point. BIG hint: revenue is maximized when selling an additional unit won’t increase your revenue, or in math terms, when MR = 0.)

CEO’s proposal: she keeps 20% of TR.

Owners’ proposal: CEO keeps 10% of TR.

2.    Suppose you are asked to mediate in the negotiations. Can you propose an incentive-based compensation scheme for the CEO that both parties are likely to accept, assuming everyone would like to maximize their income?

Your proposal:

Demonstration that everyone is better off than under their own proposal and thus should accept your proposal:

3.    Now thinking even more shrewdly: what’s the maximum price you could charge for your consulting services and still leave everyone better off?

Leisure Limited issued perpetual preferred stock with 7.5% annual dividend. The stock price is HK$115 and its par value is $100.

(a) Required:

(i) What is the current yield of Leisure Limited’s preferred stock? .

(ii) Suppose the market interest rate rises and Leisure’s preferred stock’s yield rises to 8%. What is the price of Leisure’s preferred stock then?

(b) The sales revenue of Carpe Diem Limited for 2019 is $100 million. The CEO told the sales director in December of 2019 that the board had set a target of $150 million in sales revenue for 2022 and expected that there should be stable annual growth of sales over the 3 years. The board expects the growth rate will be maintained continuously in future years. The market has the same expectation of the board. Carpe Diem Limited is expected to pay dividend of $20 per common stock at the end of the year 2020. The market price of the common stock at the beginning of 2020 is $1,000. What is the required rate of return on Carpe Diem Limited’s common stock?

(c) Leisure Limited provided a loan $3,000,000 to its subsidiary Carpe Diem Limited for 5 years which is interest bearing. The annual interest rate is 12% (compound interest method). Carpe Diem Limited has to make equal quarterly payment over the five years. How much should be repaid by Carpe Diem Limited at the end of each quarter?

(d) The investment return of an individual common stock can comprise dividend yield and eventual capital gain. Suppose there are two stocks: one stock with dividend payment and the other stock that does not pay any dividend. Is it possible that both stocks have the same investment returns? Please explain.