A study of the career paths of hotel general managers sent questionnaires to an SRS of 250 hotels belonging to major U.S. hotel chains. There were 127 responses. The average time these 127 general managers had spent with their current company was 8.92 years. (Take it as known that the standard deviation of time with the company for all general managers is 2.8 years.)

(a) Find the margin of error for a 90% confidence interval to estimate the mean time a general manager had spent with their current company: years

(b) Find the margin of error for a 99% confidence interval to estimate the mean time a general manager had spent with their current company: years

(c) In general, increasing the confidence level the margin of error (width) of the confidence interval. (Enter: ''DECREASES'', ''DOES NOT CHANGE'' or ''INCREASES'', without the quotes.)

A study of the career paths of hotel general managers sent questionnaires to an SRS of 240 hotels belonging to major U.S. hotel chains. There were 133 responses. The average time these 133 general managers had spent with their current company was 12.37 years. (Take it as known that the standard deviation of time with the company for all general managers is 1.5 years.) (a) Find the margin of error for a 90% confidence interval to estimate the mean time a general manager had spent with their current company: years (b) Find the margin of error for a 99% confidence interval to estimate the mean time a general manager had spent with their current company: years (c) In general, increasing the confidence level the margin of error (width) of the confidence interval. (Enter: ''DECREASES'', ''DOES NOT CHANGE'' or ''INCREASES'', without the quotes.)

CHAPTER 35 – THE AGENCY RELATIONSHIP

John Gregorian had a business selling expensive, customized print calendars to individuals. After several years where the business grew every year, he agreed to sell it to a larger, older company, Custom Products, Inc. As a part of the transaction, Gregorian agreed to stay on for a period of three years to manage his former business. Gregorian signed an employment agreement that included several terms including his compensation, his appointment as a vice president of Custom Products, Inc., his job responsibilities and his agreement not to disclose any confidential information. During this period of employment, he gave his old business’s customer list to a friend and agreed to consult with her to help build her business selling custom photo frames. His boss at Custom Products, Inc. discovered this and called you, his lawyer, to find out if he had a good basis for suing Gregorian and what he could claim. How would you advise him?

In the world market, a pair of shoes from China is sold for $40 and that from Mexico is $50. U.S. made shoes are $70 a pair. Initially U.S. does not belong to any free trade agreement and imposes an ad valorem tariff of 30%. Later, the U.S. joins a free trade agreement with Mexico and remove all trade barriers including tariffs. The import demand function for the U.S. is Q = 280 – 4P. (Hint: Draw the import demand curve of the world market as shown in the examples on the textbook and lecture slides.)

14. What is the size of trade diversion effect to the U.S. economy of this free trade agreement?

Question: How would you as a healthcare executive or policymaker increase the efficiency of the U.S. healthcare system?

To answer this question, consider that there are reasons for the current high U.S. healthcare expenditures:

1. The USA does not regulate the price for healthcare services – using, in most cases, a free-market approach to determine prices.
2. The demographics of the U.S. population is skewed towards the elderly and age and cost increase together.
3. The U.S. population as a whole is a nation of people with multiple chronic diseases like HTN and DM and obesity. The consequences of several lifestyle choices contribute to the high cost of chronic care.
4. The U.S. healthcare system does not seem to work as well as other healthcare systems in the world.

Suppose that the spot price of the Canadian dollar is U.S. $0.95 and that the Canadian dollar/U.S. dollar exchange rate has a volatility of 8% per annum. The risk-free rates of interest in Canada and the United States are 3% and 6% per annum, respectively. Calculate the value of a European call option to buy one Canadian dollar for U.S. $0.95 in nine months. Use put-call parity to calculate the price of a European put option to sell one Canadian dollar for U.S. $0.95 in nine months.

What is the CAD-denominated price of a European call option to buy one U.S. dollar for Canadian $1.0526(=1/0.95) in nine months?

In 2011, New Orleans, Louisiana experienced an aggressive recession as compared to the rest of country. With unemployment rates topping 15%, the city was faced with many challenges financially, economically, and socially.

In addition to the financial challenges, the city was also experiencing political instability and corruption. Various major city officials were being investigated for fraud, bribery, and other criminal charges.

Spark Electric, operating as a natural monopoly, was the only company in the area providing electric services to New Orleans households. Like many other companies, it was experiencing financial difficulties and could no longer continue without some intervention. This was mainly due to high operating costs, foreclosures in the area, and the fact that many households were not paying their bills.

As a result, Spark Electric came to a standstill in the latter part of 2011. Frank Goldberg, Spark Electric CEO, gathered the Board of Directors and determined that the company would need to take some sort of action in order to remain in business.

CEO Goldberg outlined four proposals and urged each board member to vote accordingly, providing justification for their chosen proposal.

The following are the four proposals made by CEO Goldberg:

1.      Choose which of the four proposals you would consider to be the most efficient and best choice for the people of New Orleans. Explain why you believe this would be the best proposal and why the other proposals would not be as effective.

2.      Is competition needed in this situation? How does competition alter the dynamics of the city? How does competition alter the dynamics of the household?

3.      Taking into account that Spark Electric is operating as a natural monopoly, what should be its goal? How should it determine its price?

4.      How should you forecast the outcome for Spark Electric?

5.      What are the different types of risk involved in your proposal choice?

6.      What types of costs should be considered for your proposal?

7.      Did a principle agent problem occur in this situation? How can it be avoided moving forward?

Shucker’s Sea Food has three restaurants as shown below.

Management is concerned about the continued losses shown by Store A. They seek a recommendation from you, as a recent MBA graduate, as to whether or not the store should be discontinued. The special equipment used in each store has no resale value. If store A is closed, all employees will be discharged.

For discussion:

1. What is the financial advantage (disadvantage) of discontinuing Store A? The company has no alternative use for the restaurant facility.

2. How might the statements be restructured to provide a more informative management report for analysis purposes.

Around 1900, a small town on the U.S.-Mexican border was experiencing a strange currency exchange situation. On the Mexican side of the border, a U.S. dollar was only worth ninety Mexican peso (1 USD = 0.90 MXN), while on the U.S. side, a Mexican peso was only worth ninety U.S. cents (1 MXN=0.90 USD). In other words, the citizens of both countries discounted the other country's currency by ten percent.

In this particular town, the international border ran right down the center of the main street, and there were bars on both sides catering to workers from the surrounding area. One Saturday, an American worker rolled into town with little money (only U.S. $1.00) but lots of financial cunning. He stopped at the first bar he found on the U.S. side of the street, ordered himself a ten-cent beer, paid with his U.S. dollar, and asked for a Mexican peso in change (worth only U.S. $.90, remember). After finishing his beer, he walked across the street to a Mexican bar, ordered another ten-cent beer, paid with the Mexican Peso, and asked for a U.S. dollar in change (there, worth only Mexican Peso $.90). Back he went to the American side for another beer, then back across to the Mexican side -- and so on all afternoon and evening, finally staggering back to his camp after a final drink from a Mexican bar and a U.S. one-dollar bill in change -- just as he had started out with.

Use the exchange rate theory to explain why this worker had free beer.

Around 1900, a small town on the U.S.-Mexican border was experiencing a strange currency exchange situation. On the Mexican side of the border, a U.S. dollar was only worth ninety Mexican peso (1 USD = 0.90 MXN), while on the U.S. side, a Mexican peso was only worth ninety U.S. cents (1 MXN=0.90 USD). In other words, the citizens of both countries discounted the other country's currency by ten percent.

In this particular town, the international border ran right down the center of the main street, and there were bars on both sides catering to workers from the surrounding area. One Saturday, an American worker rolled into town with little money (only U.S. $1.00) but lots of financial cunning. He stopped at the first bar he found on the U.S. side of the street, ordered himself a ten-cent beer, paid with his U.S. dollar, and asked for a Mexican peso in change (worth only U.S. $.90, remember). After finishing his beer, he walked across the street to a Mexican bar, ordered another ten-cent beer, paid with the Mexican Peso, and asked for a U.S. dollar in change (there, worth only Mexican Peso $.90). Back he went to the American side for another beer, then back across to the Mexican side -- and so on all afternoon and evening, finally staggering back to his camp after a final drink from a Mexican bar and a U.S. one-dollar bill in change -- just as he had started out with.

Use the exchange rate theory to explain why this worker had free beer.

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