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- QUESTION 4 You form a collar by buying a put with an exercise price of X1 = $22 and a premium of P = $4, and selling a call with an exercise price of X2 = $97 and a premium of C = $6. Both options mature in 8 months, and both have the same underlying asset. In addition, you buy the underlying asset for its current spot price of S = $65. Find the profit of this collar at expiration if the ending price of the underlying asset is ST= $58. Do NOT use the $ symbol in your answer; just write a numerical value. Of course, include the negative sign if the answer is negative; but do not include the positive sign if the answer is positive. (Acceptable error = 1)The demand and supply functions for a commodity are given below p = D(q) = 80e-0.023q p = S(q) 35e0.0299 = What in the -.. isntitu? 15 0 Now at this equilibrium quantity and price... B. What is the consumer surplus? 706.5 C. What is the producer surplus? 1064.8 noproct 011 x (nearest 1) x (nearest 1) U.1)tion 18 Find the producers' surplus for the supply curve p = 0.02x + 7 at x = 100. $800 $100 O $200 O $900 • Previous
- This problem is based on the fundamental option pricing formula for the continuous-time model developed in class, namely the value at time 0 of an option with maturity T and payoff F is given by: We consider the two options below: Fo= -rT = e Eq[F]. 1 A. An option with which you must buy a share of stock at expiration T = 1 for strike price K = So. B. An option with which you must buy a share of stock at expiration T = 1 for strike price K given by T K = T St dt. (Note that both options can have negative payoffs.) We use the continuous-time Black- Scholes model to price these options. Assume that the interest rate on the money market is r. (a) Using the fundamental option pricing formula, find the price of option A. (Hint: use the martingale properties developed in the lectures for the stock price process in order to calculate the expectations.) (b) Using the fundamental option pricing formula, find the price of option B. (c) Assuming the interest rate is very small (r ~0), use Taylor…4. tind the absoule maremum and minimum value on[G,9] %3DAt the beginning of year 1, a new machine must be purchased at the cost of 130K TL. The cost of maintaining a machine i years old is given in the table below. Due to the inflation, the purchase cost of a new machine at the beginning of Year 2, Year 3, and Year 4 would be 140K, 150K, and 165K respectively. The trade-in value is fixed at 50K for a replaced machine regardless of the age. Your goal is to minimize the total cost (purchasing plus maintenance) of having the machine for four years. Determine the year(s) in which a new machine should be purchased and calculate the total cost. Age at the beginning of the year Maintenance cost for the next year(K TL) 20 1 35 2 65 120
- The demand and supply functions for a commodity are given below p= D(q) = 80e-0.023q p = S(q) = 35e0.029q A. What is the equilibrium quantity? What is the equilibrium price? Now at this equilibrium quantity and price... B. What is the consumer surplus? C. What is the producer surplus? (nearest 0.1) (nearest 0.1) (nearest 1) (nearest 1)A 5-year contract provides earnings which can be modeled by the income function: c(t)=300,000+200,000tc(t)=300,000+200,000tIf the annual inflation rate is 3 %, then the present value of the contract is given by: ∫50(300,000+200,000t)e−0.03tdt∫05(300,000+200,000t)e-0.03tdtFind the present value of the contract. You may use technology to evaluate the integral and should round your final answer to two decimal places.Suppose stock A is priced at $30/share and the company will pay a dividend of $0.30/share after two months. An investor purchases 100 shares of A and invests all dividends received at a continuosuly compunded risk-free rate of 5%. After 3 months the stock is sold when the price is $35.40/share. Calculate the 3-month profit.
- ! (asap)2.) If $1o00 is depositid at an APR of 4.5%• , the accant to double? how long will it take lor the valve o1+ toSuppose Becky gets a sales bonus at her place of work that gives her an extra $400 of disposable income. She chooses to spend $300 and save the remaining $100. From this, you can tell that Becky's marginal propensity to consume (MPC) is0.75 , and her marginal propensity to save (MPS) is0.25 . Mathematically, it must always be true that: Saving = a. Disposable income+Comsumption b. Comsumption-Disposable income c. Disposable income-Consumption Therefore, it must also be true that: MPS = a. 1-MPC b. 1+MPC c. MPC