6. Stock price simulation: A stock’s price is lognormally distributed with mean μ = 15%. The current stock price is S0 = 35. Following the template on the spreadsheet, create 60 static standard normal deviates using Data|Data Analysis|Random Number Generation. Use these random numbers to simulate the stock price path over 60 months. Create price paths for σ = 15%, 30%, and 60% and graph these three paths on the same axes.
In: Finance
The current price of a stock is $41. During each 6-month period, the price will either rise by 29% or fall by 22.5%. The annual interest rate is 8.16%. Calculate the value of a one-year American PUT option on the stock with an exercise price of $40.
In: Finance
An investor obtains the following information:
• Stock price today = $120
• Stock price one year from today can take two values: $110 or $130
• Exercise price = $120
• Risk free interest rate = 5% per annum
What should be the price of a put option on the given stock under these conditions (use discrete discounting)?
In: Finance
Explore the relationship between the selling price appraised value and the selling price.
(Draw a scatterplot and then do simple regression.)
. Draw a scatterplot first. What is the regression equation for Selling Price based on Appraised Value?
2. For which of the remaining variables is the relationship with the home's selling price Stronger?
3. Find a regression equation that takes into account ALL the variables in the data set.
4. What percent of a home's selling price is associated with all these v
| House | Appraised Value | Selling Price (Y) | Square Feet (X) | Bedrooms (X) | Bathrooms(X) |
| 1 | 119,370 | 121,870 | 2050 | 4 | 5 | |
| 2 | 148,930 | 150,250 | 2200 | 4 | 4 | |
| 3 | 130,390 | 122,780 | 1590 | 3 | 3 | |
| 4 | 135,700 | 144,350 | 1860 | 3 | 3 | |
| 5 | 126,300 | 116,200 | 1210 | 2 | 3 | |
| 6 | 137,080 | 139,490 | 1710 | 3 | 2 | |
| 7 | 123,490 | 115,730 | 1670 | 3 | 3 | |
| 8 | 150,830 | 140,590 | 1780 | 3 | 4 | |
| 9 | 123,480 | 120,290 | 1520 | 4 | 4 | |
| 10 | 132,050 | 147,250 | 1830 | 2 | 3 | |
| 11 | 148,210 | 152,260 | 1700 | 3 | 3 | |
| 12 | 139,530 | 144,800 | 1720 | 3 | 4 | |
| 13 | 114,340 | 107,060 | 1670 | 3 | 4 | |
| 14 | 140,040 | 147,470 | 1650 | 3 | 3 | |
| 15 | 136,010 | 135,120 | 1610 | 2 | 1 | |
| 16 | 140,930 | 140,240 | 1570 | 3 | 4 | |
| 17 | 132,420 | 129,890 | 1650 | 4 | 5 | |
| 18 | 118,300 | 121,140 | 1640 | 3 | 4 | |
| 19 | 122,140 | 111,230 | 1420 | 2 | 3 | |
| 20 | 149,820 | 145,140 | 2070 | 4 | 3 | 149,820 |
In: Statistics and Probability
In: Economics
What is second degree price discrimination and third degree price discrimination? Explain with examples.
In: Economics
Suppose the world price for a good is lower than the domestic price without trade. Explain the two sources of deadweight loss arising from a tariff.
IMPORTANT: I know that the two sources of deadweight loss arising from tariffs are inefficent production and lost transactions. However, I don't know why that is. Could you please explain to me why inefficent production and lost transactions are the two sources of deadweight loss arising from tariffs when the world price for a good is lower than the domestic price without trade? Thank you
In: Economics
suppose the price of compact disks(CD) is $10 each. Suppose the price for downloading tracks of music legally is $1 for each song. Suppose Susan has $30 to spend each month on music. Draw the budget constraint with CDs on the horizontal axis. Suppose the price of CDs fall to $5. Draw the budget line. Show using the indifference curve the beginning and the ending maximizing choices and the substitution and income effect given that CDs are inferior but not Giffen goods. label the subsitution and income effects.
Also if CD rises to $15 and is normal good
if CD rises to $15 and is inferior good
if CD rises to $15 and is Giffen food
if cd falls to $5 and is normal good
if cd falls to $5 and is Giffen good.
In: Economics
Price change to maximize profit. A business sells n products, and is considering changing the price of one of the products to increase its total profits. A business analyst develops a regression model that (reasonably accurately) predicts the total profit when the product prices are changed, given by Pˆ = βT x + P , where the n-vector x denotes the fractional change in the product prices, xi = (pnew − pi)/pi. Here P is the profit with the currentiprices, Pˆ is the predicted profit with the changed prices, pi is the current (positive) price of product i, and pnew is the new price of product i.
(a) What does it mean if β3 < 0? (And yes, this can occur.)
(b) Suppose that you are given permission to change the price of one product, by up to 1%, to increase total profit. Which product would you choose, and would you increase or decrease the price? By how much?
(c) Repeat part (b) assuming you are allowed to change the price of two products, each by up to 1%.
In: Math
How are price and quantity variances computed? Why are separate price and quantity variances useful to an organization?
In: Accounting