Discussion 1
- Use your own words and be sure to support your statements with logic and arguments. Post your comments
Q1- Recognize how changes in supply and demand affect market outcomes and explain the effect of government regulation on prices?

Q2- Students are required to reply to at least two peer responses to this week’s discussion question.

((((These answers students, I want you to answer the first and second answers)))

1-Demand is an inverse relationship between the quantity of output and the price. If the price of the product falls, the demand for it increases, and vice versa. For example, I have a mocha cup and a latte coffee cup, the price of latte coffee is lower than the price of a mocha cup. In this case, the demand for a cup of latte coffee increases, and the demand for a mocha cup decrease.

Supply is a centrifugal relationship between quantity supplied and price. Suppliers offer less quantity when the price falls and more quantity when the price rises.

For example, a factory producing pasta whose market price is 6 riyals, if it falls to 3 riyals, the quantity supplied decreases because it does not make a profit, but if the price increases to 8riyals, then the quantity supplied to increase. So supply and demand change with the change in the market price of a commodity.

Determining the price is in the interest of merchants, factory owners, companies, and consumers, and it is a price that everyone can bear and the economy does not lose to the state, and it prevents merchants from raising the price from the top Limit.

2- The price of the product changes if consumer demand increases for it and thus leads to an increase in its supply. And when the supply becomes equal to the demand, the equilibrium price and the quantity of supply decrease.

The most prominent things that governments have done in regulating market prices is to impose taxes on products in which the supply increases. After the tax, the price becomes high, At this, the desire of the consumers to demand will decrease.

I want an article answer

Consider the market for cheese curds in Madison. Assume the quantity (Q) is measured in pounds of cheese curds and the price (P) is measured in dollars per pound. Demand and supply in the market are given by following equations:

Demand: Qd = 300 - 50P Supply: Qs = 50P – 100

a) Draw a graph of the supply and demand curves in this market. Pay special attention to the y-intercept of the supply curve. Find the equilibrium price and quantity in the market and calculate consumer, producer and total surplus. Now suppose that the government decides to impose an excise tax of $1 per pound of cheese curds in order to control or limit the consumption of cheese curds.

b) Find the new equation for the supply of cheese curds with the imposition of this excise tax. What happens to the equilibrium quantity and price of cheese curds after the imposition of an excise tax? Calculate the value of consumer surplus, producer and total surplus in this market once this excise tax is implemented. How much tax revenue is generated when this excise tax is implemented? What is the amount of deadweight loss due to the excise tax?

An investor wishes to purchase a 1-year forward contract on a risk-free bond which has a current market price of £97 per £100 nominal. The bond will pay coupons at a rate of 7% per annum half-yearly. The next coupon payment is due in exactly 6 months, and the following coupon payment is due just before the forward contract matures. The 6-month risk-free spot interest rate is 5% per annum effective and the 12-month risk-free spot interest rate is 6% per annum effective. Stating all necessary assumptions

(a) Calculate the forward price of the bond.

(b) Calculate the 6-month forward rate for an investment made in 6 months’ time.

(c) Calculate the purchase price of a risk-free bond with exactly 1 year to maturity which is redeemed at par and which pays coupons of 4% per annum half-yearly in arrears.

(d) Calculate the gross redemption yield from the bond in (c).

(e) Comment on why your answer in (d) is close to the 1-year spot rate.

. Consumer Reports provided extensive testing and ratings for more than 100 HDTVs. An overall score, based primarily on picture quality, was developed for each model. In general, a higher overall score indicates better performance. The following (hypothetical) data show the price and overall score for the ten 42-inch plasma televisions (Consumer Report data slightly changed here):

Use the above data to develop and estimated regression equation and interpret the coefficients. Compute Coefficient of Determination and correlation coefficient and show their relation. Interpret the explanatory power of the model. Estimate the overall score for a 42-inch plasma television with a price of $3400. Finally, test the significance of the slope coefficient. (Note that you need to answer all parts of the question and provide necessary interpretations to get full points).

Company A common stock 1,800,000 shares, B= 1.5. Company A just paid a dividend of $.80, with expected dividends growth at 5% per year. The ERM is 12%, and TB =yielding 3.5%. The most recent stock price for Company A is $61.

B= beta, ERM = expected return on market, TB = Treasury Bills

Company A has 40,000 semi-annual-coupon bonds with CR= 7%, PV= $1000, CPQ=119.80%; the bonds have 25 years to maturity.

It also has 100,000 shares of 4% dividend preferred stock with a current price of $78, and a PV= $100.

CR = Coupon Rate PV = par value, CPQ= current price quote

Ignore all floatation costs. The tax rate is 40%.

Calculate the cost of equity using the DCF method.

Calculate the cost of equity using the CAPM method.

Calculate the before-tax cost of debt.

Calculate the cost of preferred stock.

What are the percentages of total value of Floyd in equity, debt and preferred stock?

What is Company A’s WACC, assuming cost of equity as average of (a) and (b)?

Consumer Reports provided extensive testing and ratings for more than 100 HDTVs. An overall score, based primarily on picture quality, was developed for each model. In general, a higher overall score indicates better performance. The following (hypothetical) data show the price and overall score for the ten 42-inch plasma televisions (Consumer Report data slightly changed here):

Use the above data to develop and estimated regression equation and interpret the coefficients. Compute Coefficient of Determination and correlation coefficient and show their relation. Interpret the explanatory power of the model. Estimate the overall score for a 42-inch plasma television with a price of $3400. Finally, test the significance of the slope coefficient. (Note that you need to answer all parts of the question and provide necessary interpretations to get full points).

10. Consumer Reports provided extensive testing and ratings for more than 100 HDTVs. An overall score, based primarily on picture quality, was developed for each model. In general, a higher overall score indicates better performance. The following (hypothetical) data show the price and overall score for the ten 42-inch plasma televisions (Consumer Report data slightly changed here):

Use the above data to develop and estimated regression equation and interpret the coefficients. Compute Coefficient of Determination and correlation coefficient and show their relation. Interpret the explanatory power of the model. Estimate the overall score for a 42-inch plasma television with a price of $3400. Finally, test the significance of the slope coefficient. (Note that you need to answer all parts of the question and provide necessary interpretations to get full points).

For every question, please write down each main step before you obtain the final answer. Correct final answer with incorrect related work (calculation) or without any work may receive 0 point. On the contrary, incorrect final answer with correct related work (calculation) will receive partial credits.

Question 3 – Call Option [4 points]: Suppose you own a call option that permits you to purchase 100 shares of the stock of Silicon Graphics for $15 per share any time in the next 3 months. Silicon Graphics has a current market price of $12 per share. Ignore taxes and transaction costs.

a) Should you exercise the option and purchase the stock if its price increases to $17? What would be your gain (loss) if you exercised the option and then immediately sold the stock?

b) Should you exercise the option and purchase the stock if its price increases to $14? What would be your gain (loss) if you exercised the option and then immediately sold the stock?