Consider an industry with identical firms, each facing a demand Q = 60,000 x [1/n - 1/20 (p P )), where Q is the output level by the firm, p is the price charged by the firm and p is the average price in the industry. Suppose each firm has a fixed cost 7500 and a marginal cost 30. In the long term symmetric equilibrium, what is the value of p, the average price in the industry? (Round your answer to the nearest integer.) Your Answer: Answer

Consider an industry with identical firms, each facing a demand Q = 60,000 x [1/n - 1/20 (p P )), where Q is the output level by the firm, p is the price charged by the firm and p is the average price in the industry. Suppose each firm has a fixed cost 7500 and a marginal cost 30. In the long term symmetric equilibrium, what is the value of p, the average price in the industry? (Round your answer to the nearest integer.) Your Answer: Answer

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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1) Using the Black and Scholes formula, for each payoff compute the price, delta and probability of being exercised: 1a) A call, K=90, So=100, T=0.25, o=0.2 and r=0.01. 1b) A put, K=37, So=35, T=0.3, o=0.3 and r=0.02. 1c) A call, K=23, So=24, T=5 months, o=24% and r=2%. 1d) A call, K=95% of So, So=50, T=9 months, o=50% and r=3%. 1e) A put, K=97% of So, So=95, T=1 year, o=D30% and r=2%. 1f) An "at-the-money" straddle, So=95, T = 3 months, o=35% and r=2%.
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 49% probability that the firm will have a 30% return and a 51% probability that the firm will have a - 7% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 31 firms of type S? b. 31 firms of type I?
Manipulating CAPM Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems. a. Find the required return for an asset with a beta of 1.48 when the risk-free rate and market return are 8% and 13%, respectively. b. Find the risk-free rate for a firm with a required return of 14.684% and a beta of 1.47 when the market return is 12%. c. Find the market return for an asset with a required return of 12.040% and a beta of 0.95 when the risk-free rate is 5%. d. Find the beta for an asset with a required return of 13.312% when the risk-free rate and market return are 10% and 12.3%, respectively. C a. The required return for an asset with a beta of 1.48 when the risk-free rate and market return are 8% and 13%, respectively, is %. (Round to two decimal places.)
Market value of High Leverage, Inc. Round your answer to the nearest dollar.$
Assume X = $100 and So = $95. With T on the X-axis and $ on the Y-axis, plot the time value (price minus intrinsic value) implied for each of the following long call prices. Pa(So,T1,X) = $6.00; Pa(So,T2,X) = $7.00; Pa(So,T3,X) = $8.20; Pa(So,T4,X) = $12.50
Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently. For both types of firms, there is a 60% probability that the firm will have a 21% return. Otherwise, the firm will have a -20% return. The standard deviation for the return on a portfolio of 20 type S firms is closest to:
5) Two firms have 0.75 difference in their beta and 5% difference in their expected return, what is the implied price of beta, risk free rate and market return?
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 64% probability that the firm will have a 25% return and a 36% probability that the firm will have a -2% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 40 firms of type S? b. 40 firms of type l? a. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type S? Standard deviation is%. (Round to two decimal places.)
The effective convexity of with a high price of $100.73, a low price of $99.24, and a current price of $99.88 given a 600bps change in yield curve is closest to A. -555 B. -198 C. -33 D. Not enough information
Under the Black-Scholes framework, consider So = 40, o = 30%, r = 8%, 80% and T=0.5. (a) Find Delta A, Gamma I' for a 45-strike European call. (b) Find the Vega of for the 45-strike call. For a 0.01 increase in volatility, what is the price (value) change in the call?
Consider a firm with a forward-looking P/E ratio of 4, a discount rate R=10% and ROE=5%. Suppose the price is equal to the fundamental value given by the DDM. What is the plowback ratio b of the firm? b=_ (answer a number between 0 and 1 with 2 decimals, e.g., 0.12)
Consider the following information about the various states of economy and the returns of various investment alternatives for each scenario. Answer the questions that follow. % Return on T-Bills, Stocks and Market Index State of the Economy Probability T- Phillips Pay- Rubber- Market Bills up made Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15…

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