Question 1. Understanding market completeness/incompleteness.There are four assets and four states:a, = [10 - k 40- 4k 0 0)'%3Dn2 = [0 0 2+ 2k: 2 + 2k][10 40 – 4k 0 0'n, = [0 0 1+ k 11 + 2k]'where k is a rcal number.(n) Write the payoff matrix A4), for general k.(b) For what values of k is the market complete?(c) Consider the payoffb4) = [11+k 4 1+k 11+ 2k]'.%3DFor what values of k can this payoff be hedged perfectly (i.e., with no hedgingerror)?

(a) The payoff matrix A^(k) is as follows: A^(k) = [10-k 40-4k 0 0] [0 0 2+2k 2+2k] [10 40-4k 0 0]…

Question 1. Understanding market completeness/incompleteness. There are four assets and four states: where k is a real number. a₁ = [10-k 40-4k 0 0]' 81₂ = 0 2+2K 2+ +24]' [10 40-4k 0 0]' nj 0 1 + k 11+2k]' aj 1 (a) Write the payoff matrix A(), for general k. (b) For what values of k is the market complete? (c) Consider the payoff b) = [11+k4 1+k 11+2k]'. For what values of k can this payoff be hedged perfectly (i.e., with no hedging error)?

Question 1. Understanding market completeness/incompleteness. There are four assets and four states: where k is a real number. a₁ = [10-k 40-4k 0 0]' 81₂ = 0 2+2K 2+ +24]' [10 40-4k 0 0]' nj 0 1 + k 11+2k]' aj 1 (a) Write the payoff matrix A(), for general k. (b) For what values of k is the market complete? (c) Consider the payoff b) = [11+k4 1+k 11+2k]'. For what values of k can this payoff be hedged perfectly (i.e., with no hedging error)?

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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a,b, c and d please
Suppose that we can describe the world using two states and that two assets are available, asset X an asset Y. We assume the asset’s future prices have the following distribution State Future Price Asset X Future Price Asset Y 1 $25 $50 2 $20 $40 The values of the unit claims implied by these assets are such that: A. C1 and C2 cannot be determined B. C1=1 and C2=1 C. C1=1, but we cannot determine C2 D. C1=5/4 and C2=5/4
D
Give typing answer with explanation and conclusion 27. EFN Define the following: S = Previous year’s sales A = Total assets E = Total equity g = Projected growth in sales PM = Profit margin b = Retention (plowback) ratio Assuming that all debt is constant, show that EFN can be written as EFN = −PM(S)b + [A − PM(S)b] × g Hint: Asset needs will equal A × g. The addition to retained earnings will equal PM(S)b × (1 + g).
Hydro Ottawa has two options for upgrading a natural gas power station to meet new government standards. Option 1: Hydro Ottawa will make the upgrades themselves. This is expected to cost $12,700 at the end of each month for 12 years. At the end of the operation (in 12 years) Hydro Ottawa expects to sell all equipment needed for the upgrade for $122,000. Option 2: Pay experienced contractors. This will cost $28,000 up front and $13,900 monthly (at the end of every month) for 15 years. Assume all interest is 3.72% compounded monthly. Round the answers to NPV (Option 1), and NPV (Option 2) to the nearest dollar. Round all other answers to two decimal places where applicable. 1) Find the net present value of option 1: P/Y = C/Y = N = I/Y = PV = PMT= FV = Payments (Cost) GA % Sale of equipment (Residual) GA GA LA %
Exercise Exercise 1. Consider the Cournot game G = (I, (Ai, Ti)i≤1) such that: 1. I = {1,2} is the set of firms. 2. AR+ is the set of firm i's strategies. 3. TAR is firm i's payoff function defined by, for some c ≥ 0, Ti(Qi, 9−i) = max{1 − (qi + q−i), 0}qi — cqi. Answer the following questions: 1. Find all (pure-strategy) Nash equilibria in the case of c = = 0. 2. Find all (pure-strategy) Nash equilibria in the case of c = (0, 1). 3. Find all (pure-strategy) Nash equilibria in the case of c = [1,∞). Exercise 2. Consider the Braess's paradox G 1. I = {1,2,. , 10} is the set of people. ... 2. A = {1,0} is person i's strategy space. = (I, (Ai, ui)i≤1) such that: 3. u AR is person i's payoff function defined by -11-Σjel aj if ai =1 ui (a) = -11-Σje(1a) if a = 0, where Σ;a; is the number of people choosing strategy 1 and Σ; (1 - a;) is the number of people choosing strategy 0. Show that every (pure-strategy) Nash equilibrium has five people choosing route SAG and five players choosing route…
only the subparts c,d, e and f please. working out/explanation too
7. You have been provided with the following data on three firms and the market: Security Firm A Firm B Firm C The Market The risk-free asset Fill in the missing values (i-vi) in the table. Oi 0.12 [ii] 0.24 0.10 0.01 Pi,M [i] 0.4 0.75 [iv] 0 Bi 0.90 1.10 [iii] [v] [vi]
a,b, c subparts
use attachment to answer questions This question relates to Diagram 1 from the 9.4 diagrams, which shows the Security Market Line. What is the expected return on the market? Select one: a. 20% b. 10% c. 15% d. 5%
(b) Find the time path of capital K(t) given the following rates of net investment flow functions (i) I(t) = 10t2 +5 K(0) = 50 (ii) I(t) = 18t5 - 2 K(0) = 24 (iii) I(t) = 30t4 K(0) = 35 %3D (iv) I(t) = 23t K(0) =15
6

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