On May 1, the share price of Company Monash is $60 and its December futures price is $54.7. On July 1 the share price is changed to $64 and its December futures price is changed to $64. An investor entered into futures contracts on May 1 to hedge his/her purchase of the share of Company Monash on July 1. The investor closed out his/her position on July 1. What is the effective price (after taking account of hedging) paid by the investor?

When the price of oil fell in 2014 and 2015, ExxonMobil’s stock price dropped in expectation that earnings would also eventually fall. The P/E ratio was below 10 for some time. Go to finance.yahoo.com and type “XOM” into the “Quote Lookup” box. Scroll down and click on “ExxonMobil Corporation.”

Click on “Profile” and write a one-paragraph description of the company’s activities. Return to the summary page and write down the company’s P/E ratio. Is it still relatively low (under 15)?

Compare ExxonMobil to others in the industry (Chevron, BP, etc.) based on the P/E ratio and the PEG ratio (the P/E ratio divided by annual growth).

Go back to the summary page. Is the stock up or down from the prior day? (See the number in parentheses next to the share price.)

What is its 52-week range?

Click on the “Analysts” heading. What are the Average Earnings Estimate, Low Earnings Estimate, and High Earnings Estimate? How many analysts follow earnings?

“...the relationship between futures price and expected future spot price of an underlying asset depends on the systematic risk of the underlying asset...” Critically evaluate this statement and support your answer mathematically

a) The price company A’s stock is $50 and the price of its 3-month European call option on the stock with a strike price of $52 is $2. Draw the payoff graph for the option buyer.

b)The risk-free rate is 4% (compounded quarterly). The 3-month European put option with a strike price of $52 is sold for $3. The stock pays a quarterly dividend of $0.5. Given the call option information in a), describe the arbitrage strategy and calculate the profit.

c)Company B’s stock price is currently $20. It is known that at the end of 3 months it will be either $23 or $18. The risk-free interest rate is 5% per annum with continuous compounding. What is the value of a 6-month European call option with a strike price of $21? Show your work

Explain the practise of price discrimination and discuss whether you think that price discrimination is good or bad for the economy?

1. A price response function is d(p) = 8000 – 200 p. If the unit price is $10, what is the point elasticity at this price? What if the unit price is $20? b. A new laptop’s production cost is $400. Its current retail price is $500. At this price, the price elasticity is c. Is the current price optimal? Should the company increase or decrease its price? What is the optimal price? The current price is not optimal as price elasticity is way to high meaning that as price increases demand will most likely decrease which is not good. An optimal price would reflect a price elasticity of 0 meaning that it has little to no effect on demand. I think that the laptop c. A manufacturer faces a linear price response function d(p)=8000 – 200p. The unit production cost is $10. The manufacturer’s capacity is 6000 units. What is the optimal price? What is the total profit of the manufacturer? d. A major machine breakdown reduces the manufacturer’s capacity to 2000 units. What is the optimal price now? Does reducing capacity always result in increasing optimal price? 2. A manufacturer faces a linear price response function d(p)=8000 – 200p. The unit production cost is $10. The manufacturer can segment market into two parts by promising different lead times. (1) If the separating price is at $30, what are the optimal prices for the two segments? What is the total profit? (2) If the separating price is at $20, what are the optimal prices for the two segments? What is the total profit?

Given: a stock price of $70; an exercise price of $70; 70 days until the expiration of the option; a risk free interest rate of 6%; the annualized volatility of 0.3242. No dividends will be paid before option expires.

Compute the value of the call option.

Use the Black-Scholes Option Pricing Model for the following problem

1. the spot price on the S&P 500 is $20,000 and the 1-year futures price is $20,609.09. The 1-year risk-free rate is 3% per annum with continuous compounding.

   1. Draw the profit and payoff function for the long future. (Provide labels for the axes and label a point on the functions above, below and at the futures price)

   2. Note an S&P 500 futures contract is for 250 times the S&P 500. Calculate what the payoff and profit at expiration is if the spot price is _______.

      i. $19,500 ii. $20,000 iii. $21,100

The current price of Kilot Corporation is $30.00. Its stock price will either go up by 30% or down by 30% in one year. The stock has no dividends. The one year risk free rate is 4%. Using the binomial model, calculate the price of a one years put option on Kilot Stock with a strike price of $32. (show your calculations; use a binomial tree/timeline with two branches to summarize the information)