Use a 2 step binomial tree to value a new exotic derivative. Draw the tree and label the stock prices and derivative values at each node.

The option expires in 6 months. The interest rate is 10% annually continuously compounded. The Strike Price (K) is 100.

The spot price is at 100. U= 1.2 and D= 0.8 for each quarterly period. The payoff of this derivative is (ST/K). By this I mean that the payoff is the price of the underlying stock divided by the Strike Price.

Suppose that the extended (generalized) demand function for good Y is: Qd Y= 250,000 – 500 PY – 1.5 M + 240 PX

where:

Qd Y = quantity demanded of good Y

PY = Price of good Y

M = Average income of consumers

PX = Price of related good X

1.) You know that when M = $60,000, P_X= $100, and P_Y= $200 then Q_d^Y= 84,000

Now let’s suppose that the price of the related good X decreases from $100 to $50, but income remains constant (at $60,000).  Assume that the price of good Y is also constant at $200.

You also know when M = $60,000, P_X= $50, and P_Y= $200 then Q_d^Y= 34,000

Use these prices of good X and the quantities demanded of good Y to calculate the cross-price elasticity of the demand of good Y when the price of good X decreases from $100 to $50.

2) Consider your answer to part 1.  Based on the value of the cross-price elasticity of demand you just estimated, are goods X and Y substitutes, complements or unrelated?  Why?

3) You know when M = $60,000, P_X= $100, and P_Y= $200 then Q_d^Y= 84,000

Now let’s suppose that consumer income increases from $60,000 to $80,000, but the price of good X remains constant (at $100).  Assume that the price of good Y is also constant at $200.

If M = 80,000, P_X= $100 and P_Y = $200 then Q_d^Y= __________?

Use these income levels and quantities demanded of good Y to calculate the income elasticity of the demand for good Y when income increases from $60,000 to $80,000.

Show your work

4) Consider your answer to part f. Based on the value of the income elasticity of demand you just estimated, is good Y normal, inferior or income independent?

I want to remind everyone that our first DQ is due Saturday night. Let's begin by showing your understanding of supply and demand.

Create a supply and demand graph in Excel that demonstrates the relationship between the amount buyers are willing to purchase and the quantity available (see page 100 for an example). You may create your own data points (less than 10 data points). Please attach your graphs.

Your supply and demand graph should be labeled with: price, quantity, a supply line, and a demand line.

On a separate graph, show an outward shift in market supply.

For a new product, sales volume in the first year is estimated to be 50,000 units and is projected to grow at a rate of 7% per year. The selling price is $100 and will increase by $10 each year. Per-unit variable costs are $22 and annual fixed costs are $1,000,000. Per-unit costs are expected to increase 4% per year. Fixed costs are expected to increase 10% per year.

Develop a spreadsheet model to predict the net present value of profit over a three-year period, assuming a 4% discount rate.

Please include Excel worksheet with all the details.

Derby Inc. is a manufacturer and retailer of bicycles. The company offers a 2 year standard (assurance type) warranty with all bikes sold to cover normal manufacturing defects. In the first quarter of 2020, Derby sold a total of 250 bikes at a retail price of $400 each. Each bike costs on average $225 to produce and, historically, the costs associated with the warranty average $75 per bike. The company accepts cash and debit cards as payment for the bikes. a) Prepare all journal entries related to the sale of the 250 bikes that occurred in the first quarter of 2020. b) In the second quarter, Derek brings in his bike for some repairs due to faulty steering. Derby paid $100 of labour and $30 for parts to repair Derek’s bike. These costs were covered by the basic warranty. Prepare the journal entry to account for the repairs made to Derek’s bike. c) The repairs on Derek’s bike totalled $130 while the estimated average cost of the warranty was $75. Do you think that Derby made an error in estimating the warranty cost? Explain and support your answer. d) At the end of the second quarter, because of adverse economic conditions associated with a global pandemic, the expected selling price per bike has fallen to $230. The cost to sell each bike averages $20 per bike. There are 100 bikes in inventory at the end of the second quarter. What impact, if any, does this information have on the financial statements at the end of the second quarter? Explain and support your

Olivia is a 33 year old G3 P2 who just gave birth to her 8 lb. 9 oz. baby boy by cesarean section after 15 hours of labor for failure to progress. The baby’s Apgar scores: 1 minute: 8 5 minutes: 9. The baby was admitted to the newborn nursery for evaluation and transition. Olivia was transferred to the postpartum unit, where you are the nurse and have assumed care of Olivia. You introduce yourself, orient her to her room, call light and review safety precautions. You perform your first assessment on Olivia and VS are within normal limits, fundus is firm, incision is intact, small amount of vaginal bleeding, no blood clots, lower leg edema is 1+, Foley catheter is in place and draining to gravity. Olivia appears withdrawn and asks to rest while her baby is in the nursery. Her husband and family have left to get breakfast and to rest after spending time with her and the baby while she was in recovery. Her husband plans to return after lunch. Olivia admits to you that she is disappointed that she could not have her baby vaginally after all she had done to prepare for the birth of her baby. She states “this baby was way too big.”

1. What about the initial assessment and conversation with Olivia would you want to evaluate further?
2. Explain “baby blues” and postpartum depression.
3. Does Olivia show signs of “baby blues” or postpartum depression? If yes what would concern you?
4. What interventions would you as the nurse implement if you noticed signs of “baby blues” or postpartum depression?

You believe XCOM stock price willdrop in a month, and you have decided to perform a short sales transaction on 100 shares of XCOM stock at a trade price of $100 per share. The dealer demands short sales interest of $5 for 1 month. Suppose 1 month later, XCOM stock price is 450. What is your profit from this short sales transaction?

  YOU WANT TO PROTECT YOUR INVESTMENT SO YOU BOUGHT A SROCK AT 100 AND THE STRIKE PRICE IS 100 DOLLAR YOU PAID 3 DOLLARS AS PREMIUM SHOW THE MAX LOSS MAX PROFIT, BREAK EVEN If price is now 95 what is your profit? AND PLOTT IT ON A DIAGRAM

KFA has issued a 100-year coupon bond with par of $1,000, and a 6.50% annual coupon paid semi-annually. Calculate its price for each of the following three YTM scenarios: 4.0%, 6.0%, and 8.0%.

KFA is evaluating a project with the following cash flows in the first 4 years: $4,000, $5,000, $6,000, and $7,000. Use an 8.0% discount rate to calculate the project's net present values (NPV) for three potential initial investments: $11,000 (scenario 1), $13,000 (scenario 2), and $15,000 (scenario 3). Assume no residual value.