Q1;Consider the following markets in the United States: Alarm Clocks, Art Gallery Visits, LED Lights, Inflatable Pools. Which order is most likely ranked from the biggest percentage increase in sales to the biggest percentage decrease in sales due to COVID-19?

Q30:

Consider the following markets in the United States: Cigarette Deliveries, Audiobooks, Pet Sitters, Eyeliner. Which order is most likely ranked from the biggest percentage increase in sales to the biggest percentage decrease in sales due to COVID-19?

Q31:

A price floor set above the equilibrium price will NOT result in a/an

A 12.25-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield) has convexity of 139.2 and modified duration of 11.34 years. A 40-year maturity 6% coupon bond making annual coupon payments also selling at a yield to maturity of 8% has nearly identical modified duration—-12.30 years—but considerably higher convexity of 272.9.

a. Suppose the yield to maturity on both bonds increases to 9%. What will be the actual percentage capital loss on each bond? What percentage capital loss would be predicted by the duration-with-convexity rule? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Zero-Coupon Bond

Actual Loss %?

Predicted loss %?

Coupon Bond

Actual Loss %?

Predicted Loss %?

b. Suppose the yield to maturity on both bonds decreases to 7%. What will be the actual percentage capital gain on each bond? What percentage capital gain would be predicted by the duration-with-convexity rule? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Zero-Coupon Bond

Actual gain %?

Predicted gain %?

Coupon Bond

Actual gain %?

Predicted gain %?

Suppose that there are drastic technological improvements in shoe production in Home such that shoe factories can operate almost completely with computer-aided machines. Consider the following data for the Home country:

Shoes:  Sales revenue = Ps x Qs = 100 , Payments to labor = W x Ls = 10 , Payments to labor = R x Ks = 90 , Percentage increase in the price = ∆Ps/Ps = 40%

Computers: Sales revenue = Pc x Qc = 100,  Payments to labor = W x Lc = 50 , Payments to capital = R x Kc = 50,  Percentage increase in the price = ∆Pc/Pc= 0%

a. Which industry is capital-intensive?

b. Given the percentage changes in output prices in the data provided, calculate the percentage change in the rental on capital.

c. How does the magnitude of this change compare with that of change in the earnings of labor?

d. Which factor gains in real terms, and which factor loses? Are these results consistent with the Stohlper-Samuelson theorem?

Using a diagram of relative labor demand (RD), show the effect of a decrease in the relative price of computers in Foreign. What happens to the wage relative to the rental? Is there an increase in the labor-capital ratio in each industry? Explain.

Problem 16-23

An 11-year maturity zero-coupon bond selling at a yield to maturity of 5.75% (effective annual yield) has convexity of 171.9 and modified duration of 10.06 years. A 30-year maturity 9.5% coupon bond making annual coupon payments also selling at a yield to maturity of 5.75% has nearly identical duration—10.04 years—but considerably higher convexity of 264.3.

a. Suppose the yield to maturity on both bonds increases to 6.75%. What will be the actual percentage capital loss on each bond? What percentage capital loss would be predicted by the duration-with-convexity rule? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. Suppose the yield to maturity on both bonds decreases to 4.75%. What will be the actual percentage capital loss on each bond? What percentage capital loss would be predicted by the duration-with-convexity rule? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places.)

George Johnson recently inherited a large sum of money; he wants to use a portion of this money to set up a trust fund for his two children. The trust fund has two investment options: (1) a bond fund and (2) a stock fund. The projected returns over the life of the investments are 8% for the bond fund and 20% for the stock fund. Whatever portion of the inheritance George finally decides to commit to the trust fund, he wants to invest at least 40% of that amount in the bond fund. In addition, he wants to select a mix that will enable him to obtain a total return of at least 5.5%.

a.Formulate a linear programming model that can be used to determine the percentage that should be allocated to each of the possible investment alternatives. If required, round your answers to three decimal places. Let B = percentage of funds invested in the bond fund S = percentage of funds invested in the stock fund

1. Max Max Min	B	+	S
   s.t.
   	B			≥ ≤ ≥ =		Bond fund minimum
   	B	+	S	≥ ≤ ≥ =		Minimum return
   	B	+	S	= ≤ ≥ =		Percentage requirement

b.Solve the problem using the graphical solution procedure. If required, round the answers to one decimal place. Optimal solution:

B =

S =

Value of optimal solution is= %

Problem 2-25 (Algorithmic)

George Johnson recently inherited a large sum of money; he wants to use a portion of this money to set up a trust fund for his two children. The trust fund has two investment options: (1) a bond fund and (2) a stock fund. The projected returns over the life of the investments are 8% for the bond fund and 20% for the stock fund. Whatever portion of the inheritance he finally decides to commit to the trust fund, he wants to invest at least 40% of that amount in the bond fund. In addition, he wants to select a mix that will enable him to obtain a total return of at least 5.5%.

1. Formulate a linear programming model that can be used to determine the percentage that should be allocated to each of the possible investment alternatives. If required, round your answers to three decimal places.
   

   Let B	=	percentage of funds invested in the bond fund
   S	=	percentage of funds invested in the stock fund

   	B	+	S
   s.t.
   	B					Bond fund minimum
   	B	+	S			Minimum return
   	B	+	S			Percentage requirement

2. Solve the problem. If required, round the answers to one decimal place.
   
   Optimal solution: B = , S =
   
   Value of optimal solution is  % ????

A $1,000 par value bond was issued five years ago at a coupon rate of 6 percent. It currently has 8 years remaining to maturity. Interest rates on similar debt obligations are now 8 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer to 2 decimal places.)

b. If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and input the amount as a positive percent rounded to 2 decimal places.)

c. Now assume Mrs. Pinson buys the bond at its current market value and holds it to maturity, what will be her percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and input the amount as a positive percent rounded to 2 decimal places.)

d. Why is the percentage gain larger than the percentage loss when the same dollar amounts are involved in parts b and c?

The University of Arkansas recently approved out of state tuition discounts for high school students from any state. The students must qualify by meeting certain standards in terms of GPA and standardized test scores. The goal of this new policy is to increase the geographic diversity of students from states beyond Arkansas and its border states. Historically, 90% of all new students came from Arkansas or a bordering state. Ginger, a student at the U of A, sampled 180 new students the following year and found that 157 of the new students came from Arkansas or a bordering state. Does Ginger’s study provide enough evidence to indicate that this new policy is effective with a level of significance 10%? What would be the correct decision?

Consider the following income statement for the Heir Jordan Corporation: HEIR JORDAN CORPORATION Income Statement Sales $ 46,200 Costs 34,200 Taxable income $ 12,000 Taxes (30%) 3,600 Net income $ 8,400 Dividends $ 2,800 Addition to retained earnings 5,600 The balance sheet for the Heir Jordan Corporation follows. Based on this information and the income statement, supply the missing information using the percentage of sales approach. Assume that accounts payable vary with sales, whereas notes payable do not. (Leave no cells blank - be certain to enter "0" whenever the item is not a constant percentage of sales. Enter each answer as a percent rounded 2 decimal places, e.g., 32.16.) HEIR JORDAN CORPORATION Balance Sheet Percentage of Sales Percentage of Sales Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 2,450 Accounts payable $ 4,000 Accounts receivable 4,000 Notes payable 8,400 Inventory 9,000 Total $ 15,450 Total $ 12,400 Long-term debt $ 21,000 Owners’ equity Common stock and paid-in surplus $ 14,000

Retained earnings 5,650 Fixed assets Net plant and equipment $ 37,600 Total $ 19,650 Total assets $ 53,050 Total liabilities and owners’ equity $ 53,050