MICROECONOMICS-ACCESS CARD <CUSTOM>
11th Edition
ISBN: 9781266285097
Author: Colander
Publisher: MCG CUSTOM
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Question
Chapter 3, Problem 1QE
To determine
The central coordinating mechanism in a market economy.
Expert Solution & Answer
Explanation of Solution
A market economy is a system in which decisions related to the economy and the pricing of products and services are directed by the exchanges that take place between country’s citizens and businesses. The central coordinating mechanism in a market economy is the
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Students have asked these similar questions
3. Consider a call 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 call?
What is the payoff from selling (also known as being short) the call?
Payoff from Call 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
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.
Chapter 3 Solutions
MICROECONOMICS-ACCESS CARD <CUSTOM>
Ch. 3.1 - Prob. 1QCh. 3.1 - Prob. 2QCh. 3.1 - Prob. 3QCh. 3.1 - Prob. 4QCh. 3.1 - Prob. 5QCh. 3.1 - Prob. 6QCh. 3.1 - Prob. 7QCh. 3.1 - Prob. 8QCh. 3.1 - Prob. 9QCh. 3.1 - Prob. 10Q
Ch. 3 - Prob. 1QECh. 3 - Prob. 2QECh. 3 - Prob. 3QECh. 3 - Prob. 4QECh. 3 - Prob. 5QECh. 3 - Prob. 6QECh. 3 - Prob. 7QECh. 3 - Prob. 8QECh. 3 - Prob. 9QECh. 3 - Prob. 10QECh. 3 - Prob. 11QECh. 3 - Prob. 12QECh. 3 - Prob. 13QECh. 3 - Prob. 14QECh. 3 - Prob. 15QECh. 3 - Prob. 16QECh. 3 - Prob. 1QAPCh. 3 - Prob. 2QAPCh. 3 - Prob. 3QAPCh. 3 - Prob. 4QAPCh. 3 - Prob. 5QAPCh. 3 - Prob. 1IPCh. 3 - Prob. 2IPCh. 3 - Prob. 3IPCh. 3 - Prob. 4IPCh. 3 - Prob. 5IPCh. 3 - Prob. 6IPCh. 3 - Prob. 7IPCh. 3 - Prob. 8IPCh. 3 - Prob. 9IPCh. 3 - Prob. 10IP
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