Answer:
c. $809,608e(0.01*1/252) - (15,559 - 13,495) *51 = 703,932
Explanation:
Black Scholes Model is a mathematical model for pricing a contract of an option. It is best suited for dynamic financial market. The model determines the price of an option contract after incorporating the effects of volatility. In the given scenario there are 200 contracts of a call option. The trading days are 252 in the year and risk free interest rate is 4% prevailing in the market.
Answer:
Use the Gordon Growth formula for this.
The price of a stock in the current year is:
= (Dividends in current year * (1 + growth rate) ) / (Required return - growth rate)
Current price
= (2.55 * ( 1 + 3.9%) ) / (10.4% - 3.9%)
= $40.76
In 3 years:
= (2.55 * ( 1 + 3.9%)⁴ ) / (10.4% - 3.9%)
= $45.72
In 15 years:
= (2.55 * ( 1 + 3.9%)¹⁶ ) / (10.4% - 3.9%)
= $72.36
Answer:
A) Do you think this illustrates an adverse selection or moral hazard problem?
This situation represents an adverse selection problem since the seller probably has access to more information about the car than you. Since the seller is hiding the information, it might mean that it is negative and would certainly affect your purchase decision. A moral hazard problem happens when someone takes unusually high risks because he/she has nothing to lose with the transaction.
B) What is the connection between the lack of information and the probability that a transaction will occur?
In perfect markets, information is perfect and therefore, the number of transactions maximizes. It is just common sense, imagine you want to buy a house, you will at least want to see the house and check all the documents. No one will buy a house just because a real estate agent tells them it is a nice house and it is located on a nice neighborhood.
<span>$161,000
This is a simple matter of addition and subtraction.
Starting capital: $147,000
Generated revenue: $48,000. Add to total giving $195,000
Expenses: $26,000. Subtract from total giving $169,000
Purchased equipment: $5,000. Subtract from total giving $164,000
Withdrew cash: $3,000. Subtract from total giving $161,000</span>
Answer:
-1.8%
There would be a decrease in demand of 1.8%
Explanation:
Cross price elasticity of demand measures the responsiveness of quantity demanded of good A to changes in price of good B.
If cross price elasticity of demand is positive, it means that the goods are substitute goods.
If the cross-price elasticity is negative, it means that the goods are complementary goods
Cross price elasticity = percentage change in quantity demanded / percentage change in price
-1.8 = percentage change in quantity demanded / 1%
percentage change in quantity demanded = -1.8%