### Bidding on a Piece of Land: Probabilities and StrategySuppose we are interested in bidding on a piece of land, knowing that one other bidder is also interested. The seller has announced that the highest bid exceeding $9,800 will be accepted. Assume the competitor's bid, $ x $, is a random variable uniformly distributed between $9,800 and $14,700.- **Scenario 1**: Suppose you bid $12,000. What is the probability that your bid will be accepted? (Round to 2 decimal places) - [Input Box]- **Scenario 2**: Suppose you bid $14,000. What is the probability that your bid will be accepted? (Round to 2 decimal places) - [Input Box]- **Optimal Bid Strategy**: What amount should you bid to maximize the probability of obtaining the property? (Provide the amount in dollars) - [Input Box]- **Profit Maximization**: Suppose you know someone is willing to pay you $16,000 for the property. You are considering the bid from part (c), but a friend suggests you bid $12,900. If your goal is to maximize expected profit, what should your bid be? - [Dropdown Selection]- **Expected Profit Calculation**: What is the expected profit for this bid (in dollars)? - [Input Box] Explore these scenarios and input your answers to determine the best bidding strategy and expected outcomes.

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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. Swenson Markets would like to sell an additional 1,000 shares of stock using a Dutch auction. The bids received are as follows: (Table below should be interpreted as follows: Bidder A is willing to pay $31 for each share, up to 100 shares while bidder B is willing to pay $29 for each share, up to 100 shares) (Hint: Remember that for Dutch auctions, sell shares first to bidder with willing to pay the highest price and then to bidder with second highest price and so on until all shares are sold. However, every bidder will pay the price of the last bidder to receive any shares. In other words, everyone will pay the lowest price of all successful bidders receiving shares regardless of their own price bids.) Bidder Price A B с 500 D 600 E 400 What is the total amount the issuer will receive from this auction? Ignore costs. Quantity 100 100 $31 $29 $28 $27 $26
Suppose a financial manager buys call options on 50,000 barrels of oil with an exercise price of $88 per barrel. She simultaneously sells a put option on 50,000 barrels of oil with the same exercise price of $88 per barrel. Consider her gains and losses if oil prices are $80, $87, $88, $89, and $96. (Leave no cells blank - be certain to enter "0" wherever required. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Market price Payoffs per barrel $ 80 $ 87 $ 88 $ 89 $ 96
The investor X decides to: Buy a call option for $10 with $100 as strike price Buy a call option for $15 with $90 as the strike price Sell a put option for $10 with $100 as the strike price Buy a put option for $15 with $120 as the strike price a)Calculate the result of the investor if the market price is $60 b)Calculate the result of the investor if the market price is $160 c)Represent the results of the investor for both cases a) and b) in the same figure
8. Three risk-neutral bidders compete to purchase a Princess Beanie Baby. Suppose the bidders have (private) valuations V, = $12, V2 = $14, and V3 = $16. %3D A. In a Dutch (decreasing price) auction, the winning bid would be more than $16 b. exactly $16 c. less than $16 à. B. If it were a first-price, sealed bid auction, the price would be a. more than in part A. b. the same as in part A. c. less than in part A.
Miss Good wants to buy BAD stock, which is selling for $5 per share. She can buy on margin. The initial margin requirement is 40%, and the maintenance margin is 30%. If the price decreases to $3.5, will Miss Good receive a margin call? If she does receive a margin call, but she does nothing (because she is traveling to the Moon). Then how many shares should the broker sell to keep the margin above the maintenance margin?
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The questions relate to chapters, content and respective lectures of 23, 24, 25, 27, 28, & 29 of the Hull book. If you have any calculations, please show them in your answers. (SHOW ALL WORK CORRECTLY AND CLEARLY) THANK YOU! ANSWER ALL QUESTION PARTS!!
In the coming week, the outcomes from a class action lawsuit will result in a significant shock to the price of "M", which may be positive or negative. Thus, you decide to follow a Straddle strategy using a call option and a put option with strike 105, which have premiums of 16 and 9, respectively. If the stock price is 87 today, what is the total profit of your portfolio? Keep in mind that each call option contract controls 100 shares. Please round your answer to the nearest three decimals.

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