The price of a European call option on a non-dividend-paying stock with a strike price of $50 is $6 and the stock price is $52. The continuously compounded risk-free rate is 3% and the time to maturity is six months. What is the price of a six-month European put option on the stock with a strike price of $50?
In: Finance
In: Economics
On the 1st of March, a commodity’s spot price is $60 and its futures contract price with maturity in August is $59.
On the 1st of July, the commodity spot price is $64 and its futures contract price with maturity in August is $63.50. A company entered into the futures contracts on 1st of March to hedge its purchase of the commodity on July 1. It closed out its position on July 1.
What is the effective price (after taking account of hedging) paid by the company?
a)$59.50
b)$60.50
c)$61.50
d)$63.50
In: Finance
IFRS 16
The agreed contract price is $96,000. How should this price be allocated to performance obligations? Llama limited sells and equipment on January 01, 2019 which she bought on January 01,2016 for $6,000, and has been depreciating the equipment each year at 25% per annum on a straight line basis.
It trades this equipment in for new one costing $10,000 pays the supplier $9,200 in cash. What is the gain or loss on the disposal of the old equipment?
Unicorn Express Co. pays $80,000 to replace a major component of a factory machine. The faulty component that is replaced is sold for $4,000. The carrying amount of the machine before the replacement is $900,000, of which $20,000 relates to the faulty component being replaced.
Calculate the revised carrying amount of the machine after the replacement occurs and the profit or loss disposal of the faulty component.
In: Accounting
A stock has a bid price of £80.45 and an ask price of £80.55.
Suppose you short
sell 400 shares of this stock, and then cover the position 6 months
later, when the bid and ask
prices are £78.15 and £78.25. Assume you pay 0.3% brokerage fee on
each transaction. Also,
assume that you invest the short sale proceeds for the 6 months at
3% per annum interest rate
with semi-annual compounding. What is your profit?
In: Finance
Round to 4 decimals – You must solve this by hand clearly show the answer for each part
In: Finance
4. Determinants of the price elasticity of demand
Consider some determinants of the price elasticity of demand:
| • | The availability of close substitutes |
| • | The proportion of a consumer's budget spent on the good |
| • | The time horizon being considered |
A good without any close substitutes is likely to have relatively demand, because consumers cannot easily switch to a substitute good if the price of the good rises.
A good’s price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the most elastic demand?
Sports car
Amputation procedures for patients with diabetes
Price elasticity for a good depends on the share of a consumer's budget spent on a good. Other things being equal, which of the following goods has the most elastic demand?
Monthly cell phone bill
Thumbtacks
Fish food
The price elasticity of demand for a good also depends on how you define the good.
Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between.
|
Categories |
Most Elastic |
In Between |
Least Elastic |
|
|---|---|---|---|---|
| Wine | ||||
| Beverages | ||||
| Merlot |
The price elasticity of demand is also affected by the given time horizon.
If the price of gasoline is relatively high for a long time, consumers are more likely to buy fuel-efficient cars or switch to alternatives such as public transportation. Therefore, the demand for gasoline is elastic in the short run than in the long run.
In: Economics
The
consumer price index (CPI)
is a fixed-weight index. It compares the price of a fixed bundle of goods in one year with the price of the same bundle of goods in some base year.
Suppose the market basket to compute the consumer price index consists of
200
units of good X,
175
units of good Y, and
60
units of good Z. Year 2013 is the base
year.
Prices of these goods for the years 2013, 2014, and 2015 are given below.
|
Good |
Amount in Market Basket |
Prices in 2013 |
Prices in 2014 |
Prices in 2015 |
|
X |
200 |
$2.50 |
$3.50 |
$4.50 |
|
Y |
175 |
2.50 |
3.50 |
3.75 |
|
Z |
60 |
4.00 |
5.00 |
4.20 |
Using the information above, calculate the following:
The cost of the market basket in 2013 is
$nothing.
(Round
your response to two decimal
places.)
The cost of the market basket in 2014 is
$nothing.
(Round
your response to two decimal
places.)
The cost of the market basket in 2015 is
$nothing.
(Round
your response to two decimal
places.)
Calculate the CPI for each year.
(Round
your responses to two decimal
places.)
|
CPI in 2013 |
nothing |
|
CPI in 2014 |
nothing |
|
CPI in 2015 |
nothing |
The rate of inflation between 2013 and 2014 is
nothing%.
(Round
your response to two decimal
places.)
The rate of inflation between 2014 and 2015 is
nothing%.
(Round
your response to two decimal
places.)
In: Economics
1. If the price of a good falls by 10 percent, identify the price elasticity demand from the following responses. Would the demand will elastic or inelastic?
a. 20 percent more is bought
b. 5 percent more is bought
In: Economics
For a product with common price of 5, a price ceiling of 2 has beet set which is lower than the common price. Explain in details, the impact, advantages and disadvantages of the price ceiling to the market and the customers. Explain with a simple diagram.
In: Economics