Answer:
TRUE
Explanation:
A consumer's marginal rate of substitution (MRS) can be defined as the number or amount of goods that he/she is willing to trade for another in other to gain maximum satisfaction of the goods.
Answer:
The marginal propensity to consume is 0.7.
Explanation:
The marginal propensity to consume (MPC) is a measure to determine the increase in consumer spending as a result of increase in disposable income. The marginal propensity to consume can be calculated by dividing the change in consumer spending by the change in disposable income.
MPC = change in consumption / change in disposable income
Thus, MPC = 14 / 20 = 0.7 or 70%
Answer:
0.9; 100 million; 90 million; 2,143
Explanation:
The new fuel's price change has a standard deviation that is 50% greater than price changes in gasoline futures prices.
So, if standard deviation of future prices is taken as '1' then for spot price it will be 50% higher, i.e 1.5
The hedge ratio:
= Correlation × (standard deviation of spot price ÷ Standard deviation of future prices)
= 0.6 × (1.5 ÷ 1)
= 0.9
The company has an exposure of 100 million gallons of the new fuel.
Gallons in future gasoline:
= Hedge ratio × 100 million gallons of the new fuel
= 0.9 × 100
= 90 million
Each contract is on 42,000 gallons, then
Number of gasoline futures contracts should be traded:
= 90,000,000 ÷ 42,000
= 2,142.9 or 2,143
The Chavez family has two options when applying a house loan for 30 years which is amounting to $250,000. First, the will not take the points with a monthly payment of $1580 while if they take the points, they will have a monthly payment of $1560. What they did was they did not buy the points and the reason for this was they are planning to sell the house after 5 years.
