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Dafna1 [17]
2 years ago
14

Draw the tree for a put option on $20,000 with a strike price of £10,000. the current exchange rate is £1.00 = $2.00 and in one

period the dollar value of the pound will either double or be cut in half. the current interest rates are i$ = 3% and are i£ = 2%. multiple choice none of the options both of the options
Business
1 answer:
telo118 [61]2 years ago
5 0

Answer:

$ 0.000912 / pound

Explanation:

Current spot rate : 100 pound / $ or 0.01 $ / pound

In the next period the $ value of the pound can either increase or decrease by 15%

$ Risk-free rate = 5% and

pound Risk-free rate = 1%

Net Risk- free Rate = 5 - 1

                               = 4%

Risk-Neutral Probability of price Rise (p) = (0.04 - 0.085) / (1.15 - 0.85)

                                                                   = 0.653

$ price of pound if price rises = 1.15 x 0.01 =$ 0.0115 / pound

$ price of pound if price falls = 0.85 x 0.01 = $ 0.0085 / pound

Strike price = current spot rate (as option is at the money) = 0.01 $ / pound

Therefore, pay offs one period later

if price is $ 0.0115 / pound, pay off (p₁)= 0.0115 - 0.01

                                                              = 0.0015$/ Pound

If price is 0.0085 $ / pound, pay off (p₂) = $0

Hence, Expecyed pay off = p₁ x p + p₂ x (1-p)

                                           = 0.0015 x 0.633 + 0 x ( 1 - 0.633)

                                            = $ 0.00095 / pound

Call price = Present value of Expected pay off at Net Risk-free risk

                = 0.00095 exp (0.04)

                 = $ 0.000912 / pound

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Assume that Jane’s marginal propensity to consume equals 0.8, and that in 2004 Jane spent $36,000 from her disposable income of
Hoochie [10]

Answer:

First we need to find the increase in her disposable income by subtracting the old disposable income from the new disposable income.

Old Disposable income= 40,000

New disposable income = 50,000

Change in disposable income = 50,000-40,000= 10,000

Although her mpc is 0.8 we need to find out what proportion of her disposable income does she spend on consumption.

So her disposable income was 40,000 and consumption was 36,000

36,000/40,000= 0.9

This means that Jane spends 90% of her dispoasble income on consumption, so if her disposable income increase by 10,000 her increase in consumption was

0.9*10,000= 9,000

Increase in consumption = $9,000

Explanation:

3 0
3 years ago
In one day madison laundry washed 4,000 pounds of laundry with 5 workers who each worked 8 hours. what was its productivity?
JulijaS [17]

Per wash load, productivity is $0.47.

<h3>Define productivity.</h3>

A common definition of productivity is the ratio of input volume to output volume. In other words, it assesses how effectively an economy uses labor and capital as production inputs to create a particular amount of output.

Being able to create, especially quickly and with excellent quality, is a sign of productivity. Making excellent school tasks in a short amount of time is an example of productivity. How quickly toys can be produced in a toy factory is an illustration of productivity.

It is computed by dividing a company's outputs by the inputs it used to achieve those outputs.

To learn more about productivity from the given link:

brainly.com/question/22852400

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5 0
2 years ago
The government banned running of an industry near a famous monument Taj Mahal, but ABC limited does not go by order of the court
notka56 [123]

Answer:

No

Explanation:

Taj Mahal is one of the greatest monument in the world. It is very beautiful. It is located in India. It is made up of white marble. Many people from all parts of the world come to visit Taj Mahal.

But recently the color of the marble changes its color to light yellow due to pollution. The companies near by are emitting harmful gases to the atmosphere for which the color of the white marble changed its color and became light yellowish brown.

In the context, company ABC Limited still operating near the Taj Mahal is not fulfilling its responsibility as it is destroying the beauty and existence of the world famous Taj Mahal.

3 0
3 years ago
If during 2011 the Republic of Sildavia recorded a value added of $78 billion, wages of $40 billion, profits of $8 billion, and
Otrada [13]

Answer:

$12 billion.

Explanation:

Given: Value added during 2011= $78 billion.

           Total sales= $90 billion.

Intermediate goods are the goods used to produce final product and it is not included in the calculation of GDP, however, it is included in the value of final goods.

Now, finding the value of intermediate goods purchased.

Intermediate goods= Total\ sales - Total\ value\ added

⇒ Intermediate goods= \$ 90\ billion - \$ 78 \ billion

∴ Intermediate goods= \$ 12\ billion

Hence, value of intermediate goods purchased is $12 billion.

7 0
2 years ago
Jay and jim spears own a lawn irrigation system business. they perform installations and maintenance of these systems. several o
Stells [14]

 

Jay and Jim does not only take a chance that a bigger problem may occur, since they foresee that there is a risk if they permit an illegal worker to drive a truck and has an accident on the job but they are also indirectly setting the ethics code for their firm.





8 0
3 years ago
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