2. How many seven – letter code words can be formed using a standard 26 letter alphabet (12 points)

a.         if repetition is allowed?

b.         if repetition is not allowed?

c.         if the first letter has to be a C and the rest of the letters are different?

d.         if the first two letters have to be a vowel and the rest of the letters are different?

Bonds A and B are both seven-year bonds with annual coupon payments. Bond A has a higher coupon rate and higher yield. Given this information, is it possible to determine which of the two bonds has higher duration (D)? If yes, identify this bond and explain why it has higher duration. If not possible, explain why not.

Five people on the basement of a building get on an elevator that stops at seven floors. Assuming that each has an equal probability of going to any floor, find

(a) the probability that they all get off at different floors

(b) the probability that two people get off at the same floor and all others get off at different floors.

In each of the following situations, indicate whether Walters, CPA is using unrestricted random (UR), systematic random (SR), haphazard (H), or block (B) selection.?

A. Walters created a list of all sales invoices to verify that they were supported by the appropriate shipping documents. Invoice number 15 was selected first for examination, followed by the invoices numbered 30, 45, 60, 75, 90, and so on until 40 invoices had been selected.

?B. To test the occurrence assertion regarding sales invoices, Walters randomly selected invoices from the database storage disk for examination.

?C. To ensure proper authorization of payroll functions, Walters selected all transactions during the last 5 days of each pay period to be included in the sample.

?D. Sales invoices are commonly stored in a filing cabinet during the 30-day return period before being input in the company's database. To ensure the 30-day return period was not exceeded, Walters decided to pull a few invoices from each drawer until the desired sample size was collected for examination.

?E. T&T Company's purchase orders are already pre-numbered and listed in numerical order within the company's database. As a result, Walters was able to use one of the firm's computer programs to identify random numbers and match each number with a corresponding purchase order to test the accuracy assertion.

?F. Using a random number table, Walters identified a series of 50 numbers and located the corresponding employee identification number to select time cards for examination.

?G. Walters used a computer listing of T&T's credit memos, which totaled 2,400 items, to select 4 random starting points for examination. The remaining memos were identified for testing by selecting every 24th item until the sample size reached 100 memos.

Valdosta Chemical Company manufactures two industrial chemical products in a joint process. In May, 10,000 gallons of input costing $60,000 were processed at a cost of $150,000. The joint process resulted in 8,000 pounds of Resoline and 2,000 pounds of Krypto. Resoline sells for $25 per pound, and Krypto sells for $50 per pound. Management generally processes each of these chemicals further in separable processes to produce more refined chemical products. Resoline is processed separately at a cost of $5 per pound. The resulting product, Resolite, sells for $35 per pound. Krypto is processed separately at a cost of $15 per pound. The resulting product, Kryptite, sells for $95 per pound. Required: 2-a. Allocate the company’s joint production costs for May using the physical-units method. 2-b. Allocate the company’s joint production costs for May using the relative-sales-value method. 2-c. Allocate the company’s joint production costs for May using the net-realizable-value method. 3-a. Valdosta’s management is considering an opportunity to process Kryptite further into a new product called Omega. The separable processing will cost $40 per pound. Packaging costs for Omega are projected to be $6 per pound, and the anticipated sales price is $130 per pound. Calculate the incremental profit or loss from processing Kryptite into Omega. 3-b. Should Kryptite be processed further into Omega? (The solutions to this problem that are already posted are not right and unclear please help!!!!!!

Humans are known to have a mean gestation period of 280 days (from last menstruation) with a standard deviation of about 9 days. A hospital wondered whether there was any evidence that their patients were at risk for giving birth prematurely. In a random sample of 70 women, the average gestation time was 277.7 days. Is the alternative hypothesis one-sided or two-sided? (type your choice as either one-sided or two-sided) What is the value of the test statistic? (round to 3 decimal places) What is the P-value of the test? (round to 3 decimal places) What is the conclusion of the test if alpha is 0.05? (type your choice as either reject or fail to reject)

You are saving for the college education of your two children. They are two years apart in age: one will begin college 15 years from today and the other will begin 17 years from today. You estimate your children’s college expenses to be 21,000$ per year per child, payable at the beginning of each school year. It takes four years to graduate. The annual interest is 15%. How much money must you deposit in an account each year to fund your children’s education? Your deposits begin now. You will make your last deposit one year before your oldest child enters college.

Homework Problem 18_1

An analysis of HL Corporation suggests that in the next year the price of its stock will be either $50 or $30. The current price is $40. The 1-year riskless rate is 10%.

Consider a call option that expires in one year with an exercise price of $35.

a) The Replicating Portfolio is a portfolio of stocks and bonds that exactly replicates the payoff of the call option under all conditions, in this case the two states.

What portfolio of stocks (number of shares bought or shorted) and bonds (dollars borrowed/shorted or lent/long) that has same payoff if this Call option?

b) What is the fair value of this call? and why?

c) Create a riskless hedge with the call and stock. A riskless hedge is a portfolio of stocks and calls that have the same payoff in all conditions, in this case the two states.

For example, Write 1 calls and buy .75 shares or Buy 1 call and short .75 shares.

d) An arbitrage is a strategy that has all positive cash flows with no investment or negative cash flows.

How would you create an arbitrage if the Call were priced at $15?

e) How would you create an arbitrage if the Option were priced at $5?

Perfect Competition

1. The characteristics of perfect competition are:

___________________, _____________________, ________________________

___________________, ___________________

2. The demand curve in perfect competition is: ______________ (Shape or slope)

3. The firm operates at the quantity where _________ equals ___________.

4. Total profit is equal to ___________ minus ________________.

5. The marginal revenue curve in perfect competition is: ______________ (Shape or slope)

6. The entrance of one or two new firms (in perfect competition) does what to market price?

_______________________________________,

7. For a firm to operate, price must at least cover: ____________________________

8. In the long run, (in perfect competition) a firm will always: ______________ (make profits, break even, operate at a loss)

9. The marginal revenue curve in perfect competition is equal to: ______________ (curve)

10.The entrance of one or two new buyers (in perfect competition) does what to market price?

_______________________________________,

11. In the long run, given increasing costs, the supply curve for the firm will be __________ (slope)

12. In the long run, given constant costs, the supply curve for the firm will be ____________ (slope)

13. In the long run, given decreasing costs, the supply curve for the firm will be __________ (slope)

14. The profit maximizing quantity is where marginal costs equal ___________

Two automobiles collide. One automobile of mass 1.13 x 10³ kg is initially traveling at 25.7m/s [E]. The other automobile of mass 1.25 x 10³ kg has an initial velocity of 13.8 m/s [W]. The vehicles become attached during the collision

            (a) Determine the magnitude and direction of the change in momentum for each automobile in question 7.

            (b) How are these two quantities related?

            (c) What is the total change in the momentum of the two automobile systems?