Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 28, Problem 8CQ
To determine
The over represented groups with relatively low income and the reason for staying poor.
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Students have asked these similar questions
4. Consider a put on the same underlier (Cisco).
The strike is $50.85, which is the forward price.
The owner of the call has the choice or option to buy at the strike.
They get to see the market price S1 before they decide.
We assume they are rational.
What is the payoff from owning (also known as being long) the put?
What is the payoff from selling (also known as being short) the put?
Payoff from Put with
Strike of k=$50.85
S1
Long
$100
$95
$90
$85
$80
$75
$70
$65
$60
$55
$50.85
$50
$45
$40
$35
$30
$25
Short
The following table provides information on two technology companies, IBM and Cisco. Use the
data to answer the following questions.
Company
IBM
Cisco Systems
Stock Price
Dividend
(trailing 12 months)
$150.00
$50.00
$7.00
Dividend
(next 12 months)
$7.35
Dividend
Growth
5.0%
$2.00
$2.15
7.5%
1. You buy a futures contract instead of purchasing Cisco stock at $50.
What is the one-year futures price, assuming the risk-free interest rate is 6%?
Remember to adjust the futures price for the dividend of $2.15.
5. Consider a one-year European-style call option on Cisco stock.
The strike is $50.85, which is the forward price.
The risk-free interest rate is 6%.
Assume the stock price either doubles or halves each period.
The price movement corresponds to u = 2 and d = ½ = 1/u.
S1 = $100
Call payoff=
SO = $50
S1 = $25
Call payoff=
What is the call payoff for $1 = $100?
What is the call payoff for S1 = $25?
Chapter 28 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- Consider the figure at the right. The profit of the single-price monopolist OA. is shown by area D+H+I+F+A. B. is shown by area A+I+F. OC. is shown by area D + H. ○ D. is zero. ○ E. cannot be calculated or shown with just the information given in the graph. (C) Price ($) B C D H FIG шо E MC ATC A MR D = AR Quantityarrow_forwardConsider the figure. A perfectly price-discriminating monopolist will produce ○ A. 162 units and charge a price equal to $69. ○ B. 356 units and charge a price equal to $52 for the last unit sold only. OC. 162 units and charge a price equal to $52. OD. 356 units and charge a price equal to the perfectly competitive price. Dollars per Unit $69 $52 MR 162 356 Output MC Darrow_forwardThe figure at right shows the demand line, marginal revenue line, and cost curves for a single-price monopolist. Now suppose the monopolist is able to charge a different price on each different unit sold. The profit-maximizing quantity for the monopolist is (Round your response to the nearest whole number.) The price charged for the last unit sold by this monopolist is $ (Round your response to the nearest dollar.) Price ($) 250 225- 200- The monopolist's profit is $ the nearest dollar.) (Round your response to MC 175- 150 ATC 125- 100- 75- 50- 25- 0- °- 0 20 40 60 MR 80 100 120 140 160 180 200 Quantityarrow_forward
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