Answer:
Market Principal notes that there should be no arbitration in the efficient market unless there is some arbitration so an efficient market system can quickly neutralize the situation.
The futures market for May, in the example above, is trading at $3.82 while the spot price is $3.45. The spot price month is listed but carriage costs and transportation are given as $0.20 and $0.03 per month.
This gives us a total price of $3.68 and this means the futures market is priced at a premium of $0.14.
3.82-= 0.14 (3.45 + 0.20 + 0.03)
This is not normal, of course, and traders will start shortening futures prices when going on the spot contracts for long. This would drive down the price of the futures while increasing the spot price, which should stabilize at $3.75.
Nevertheless, it is necessary to remember that in such equation there is also a borrowing fee which must also be taken into account. If the interest rate is 6 percent a year so it also takes into account a monthly finance fee of 0.5 percent of the contract value.
The government can be used to solve externality problem that are to costly for parties to solve THE ANSWER IS TRUE
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Answer:
The correct answer is option a.
Explanation:
If a tax worth €1.00 per liter on petrol is imposed it will create a tax wedge of €1.00 between the price the buyers pay and the price the sellers receive.
A tax wedge can be defined as the deviation from the equilibrium price and equilibrium quantity due to the imposition of taxes.
When a tax is imposed on a product, the consumer and producer both have to share the tax burden. The price paid by the consumers increases and the price received by gets reduced.
The quantity of product gets reduced as well.
Answer:
Required return will be equal to 9.30%
Explanation:
We have given current dividend of the year = $2.00 per year
Current price = $21.50
We have to find the market required return
Required return is equal to ratio of current dividend and current price
Required return
= 9.30 %
So required return will be equal to 9.30 %
