Considering Purchasing Power Parity and the Law of One Price:

a. Assume that the current price of a Big Mac in the United States today is $2.75. Assume also that the current price of a Big Mac in Malaysia is 6.5000 ringgits and that the current USDMYR exchange rate is 3.0250 ringgits per $. What is the implied PPP of the USD?

b. Using the assumptions above, what is the under (-) / over (+) valuation of Malaysian ringgits versus the U.S. dollar in percentage terms?

c. What are the long-term implications associated with your answer to part b.?

Price Level & inflation

•   Definition of the Consumer Price Index and the GDP deflator

• Calculation of price index (e.g., CPI, GDP deflator)

• Calculation of inflation (Note: inflation is the rate of change in a price index from one year to another)

• Limitation of the CPI (e.g., commodity substitution bias, quality bias, new goods bias, outlet substitution bias)

Determine the price elasticity of demand for commodity X, if a 15% increase in its price:
a) has no impact on its total expenditure.
b) reduces total expenditure.
c) increases total expenditure.

Explain in detail.

if the cross-price elasticity between ketchup and hamburgers is -1.2, a 4% increase in the price of ketchup will lead to a 4.8%:

a. increase in quantity demanded of ketchup.

b. drop in quantity demanded of hamburgers.

c. increase in quantity demanded of hamburgers.

d. drop in quantity demanded of ketchup.

A stock price is currently $50. A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 6% or down by 5%. The risk-free interest rate is 5% per annum with continuous compounding. Use two-period binomial models to value the six-month options on this stock. Remember to show detailed calculations of the option value at each node.

(a) What is the value of a six-month European call option with a strike price of $51?

(b) What is the value of a six-month European put option with a strike price of $51? Verify that the European call and European put prices satisfy put–call parity.

(c) If the put option in part (b) of this question were American, would it ever be optimal to exercise it early at any of the nodes on the tree?

A call option has an exercise price of $30. The stock price is currently $27 and the appropriate interest rate is 6%. The option expires in exactly one year and the sigma (The return variability of underlying asset expressed as a decimal) is 0.50 or 50%.
At expiration the stock underlying the option is selling for $34.00. What do you do? What is your loss or gain?

Group of answer choices

A. Let the option expire unexercised since the $4.00 gain is less than the price we paid for the option.

B. Exercise the option and make a profit of $4.00 ($34.00 - $30.00).

C. Exercise the option and make a profit of between $2.00 and $4.00.

D. Exercise the option and make a profit of between $0.00 and $2.00.

E. Exercise the option and make a loss of between -$2.00 and $0.00.

A stock price is currently $50. A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 6% or down by 5%. The risk-free interest rate is 5% per annum with continuous compounding. Use two-period binomial models to value the six-month options on this stock. Remember to show detailed calculations of the option value at each node.

(a) What is the value of a six-month European call option with a strike price of $51?

(b) What is the value of a six-month European put option with a strike price of $51? Verify that the European call and European put prices satisfy put–call parity.

(c) If the put option in part (b) of this question were American, would it ever be optimal to exercise it early at any of the nodes on the tree?

On Valentine’s Day, the price of roses increases by more than the price of greeting cards. Why? (Hint: Consider what makes roses and cards different and how that difference might affect supply’s responsiveness to price.)

please help and explain and do good 150-200 words

the price of a one-year pure discount bond is 96.15 and the price of a two-year pure discount bond is 92.63. what rate on a one year bond, one year from today, could you lick in today?

1. A call option has an exercise price of $40. The stock price is currently $36 and the appropriate interest rate is 6%. The option expires in exactly one year and the return variability of underlying asset is 0.50 or 50%. This is the standard deviation of the return series. How much would you pay for this call option?
2. At expiration the stock underlying the option is selling for $41.00. What do you do? What is your loss or gain?