Explain the attached questions below and draw graphs where required.
Question 35 18 pts Toro Company, based in the U.S., has a payable that is due in 6 months to its Korean supplier. The amount of the payable Is Won750 million. The company is looking to hedge this payable and retained your services to analyze the alternatives: forward hedge. money market hedge, and an option hedge. Use the following information to analyze the alternatives. Current spot rate (Won/$) = 1,120 Six-month forward rate (Won/S) = 1.150 Toro Company's WACC - 12%% 6-month investment rates (per annum): U.S. = 6,00% Korea - 12.00%% 6-month borrowing rates (per annum): U.S. - 8.00% Korea - 14.00 Call option on Korean Won = Strike price 1,210 with an option premium of 3,00% Put option on Korean Won - Strike price 1.210 with an option premium of 2.60% Compute the cost of the Money Market Hedge. Round your answer to the nearest integer.4. (30 points) Consider the following game. There are ten dollars to divide. Two players are each required to simultaneously name an integer between 0 and 10. The player who names the higher number gets to keep the money. If they name the same number, the money is equally shared between them. (a) Describe the set of players N, the set of strategies { Silien, and the payoff function QuitiEN. (b) Are there strategies that are strictly dominated? Demonstrate your reasoning. What are the resulting strategies after iterated elimination of strictly dominated strategies? (c) Find the best responses (correspondence) for each player. That is, find the strategies that maximize a player's payoff given what the other player does. (d) Find the Nash equilibria of the game. (e) Suppose now the game is changed. Whenever there is a tie, each player receives nothing. Answer the same questions in parts (b) and (c). Find the pure-strategy Nash equilibria of the game.(b) Assume these firms behave like price takers, how much will they produce and what price will they charge? Draw the outcome on a graph. What is the individual firms producer surplus? What is the total producer surplus of the market? (3 marks) (c) Suppose the four firms join together to form a single firm monopoly. What price will the cartel charge and how much output does the cartel produce? What is producer surplus for the cartel? (Hint: the marginal cost curve for the cartel firm is the supply curve found in part (a) with MC replacing P in this equation and MR = 200 -Q). What happens to consumer surplus and total welfare? (4 marks) 4. Calculate the own price elasticity of demand in the following situations (a) A price rise from po = 2 to p1 = 5 causes quantity demand to fall from go = 30 to q1 = 15 (1 mark) (b) The demand curve is given by q = 1/p with the slope of the demand curve given by $ = -1/p2. What is the own price elasticity of demand at any point?(2 marks) (c) The demand curve is given by q = 4 - 2p with the slope of the demand curve given by dp = -2. What is the own price clasticity of demand at: (i) p = 4; and (ii) p = 10? (2 marks) 5. Suppose the cost of producing q cars and q2 trucks is 45000 +80q1 + 10092. Calculate the measure of economies of scope when (1 mark each): (a) q1 = 100 and q2 = 200 (b) q1 = 500 and q2 = 800 6. Answer the following questions True, False, or Uncertain. Give a brief explanation of your answer. 1 mark for correctly identifying T, F. or U. 4 marks for explanation. (a) If a single price monopoly is instituted in what was a competitive market, consumer surplus will decrease more than producers gain. (b) If a firm's marginal cost is less than the firm's marginal revenue then the firm should decrease output and increase price. (c) If price is less than average cost then a firm will shut down. (d) A monopolist does not make a shutdown decision in the short-run and an exit decision in the long run since only competitive firms make these decisions.46. Describe the role and functions of a federal administrative agency 47. General procedures to be used in administrative agencies are set forth in the Act. 48. Administrative agencies are created by 49. The enforcement function performed by administrative agencies checks an industry's compliance with enacted by the agency- 50. Agencies may subpoena witnesses and obtain documents from a regulated company if 51. A company may refuse to comply with an agency request for records based on its Fifth Amendment right to avoid self-incriminatingue or False? 52. What is judicial review of a decision issued by an administrative law judge (AL]? 53. One of the grounds that can be raised to challenge an AL's decision is 54. The public may obtain access to agency information by filing a request under the Act. 95. Criminal law is different from lawsuits between private parties in that 56. Businesses must protect themselves from crimes "from the inside" such as 57. The two elements of a crime are actus reus and 58. Penalties for the commission of a crime may include 59. If a defendant does not testify, the prosecution may argue to the jury that this shows he is guilty. True or False? 60, A nonviolent crime such as fraud does not have a victim, True or False? 61. If a trial ends in a mistrial because the jury could not reach a unan defendant may not be tried again under the Double Jeopardy clause. True or False? 62. The constitutional right to compel the attendance of witnesses in a criminal trial is satisfied by a court's bsuance of
