:Help me answer the following questions.
30. A particular stock follows the price movement below. $31 $29 $24 $25 $26 $23 $21 today 1-month 2-months Figure 2: Stock Price Movement (a) For this part, suppose the interest rate is fixed at 1% per month. What is the price of a put option with maturity two months, and strike of $26 ? (b) Again, suppose the interest rate is fixed at 1% per month. What is the price of an exotic derivative that in 2-months has a pay off that is a function of the maximum price of the stock during the two month period given by max(S - $25, 0), where S = max St. Ost52 and t is measured in months. 31. Intel stock is trading at $120 per share, and the company will not pay any dividends over the next year. Consider an Intel European call option and a European put option, both having an exercise price of 17 2008, Andrew W. Lo and Jiang Wang 1.5 Options 1 QUESTIONS $124 and both maturing in exactly one year. The simple (annualized) interest rate for borrowing and lending between now and one year from now is 3% for each 6 month period (6.09% per year). Assume that there are no arbitrage opportunities. Is there enough information to determine which option has the higher market value? If so, which option, the call or the put, has higher market value? 32. Calculate the price of a three-month European put option a non-dividend paying stock with a strike price of $50 when the current stock price is $50, the risk free rate is 10% per annum, and the volatility is 30% per annum. What difference does it make to your calculations if a dividend of $1.50 is expected in two months? Assume that the assumptions made to derive the Black-Scholes formula are valid. 33. It is possible to buy three-month call options and three-month put options on stock X. Both have an exercise price of $60 and both are worth $10. Is a six-month call with an exercise price of $60 more or less valuable than a similar six-month put?K 91 92 93) (94) 95 (96) (97) (98 (99) 100 This Question: 1 pt This Test: 100 pts Time Remaining: 09:08:55 Consider an economy characterized by the following equations: C =75 + 0.50Y + 0.10W Aggregate Expenditure and Equilibrium I = 25 1,000- where C is desired consumption, I is desired investment, W is household wealth, and Y is national income. 800- a. Suppose wealth is constant at W = 1,000. Use the line drawing tool to draw and label the aggregate expenditure function on a scale diagram along with the 450 line to the right. Make sure that 800- the line starts at y-axis and extends to the right Desired Aggregate Expenditures Carefully follow the instructions above, and only draw the required objects. 100- b. The marginal propensity to spend in this economy is. 200- c. What is the value of the simple multiplier? The value of the multiplier is . (Round your response to two decimal places.) 200 400 800 800 1,000 Actual National Income d. Using your answer from part (b), what would be the change in equilibrium national income if desired investment increased to $125? (0,0) The change in equilibrium national income would be $ . (Round your response to the nearest dollar) e. Assuming investment is $25, if household wealth increased from $1,000 to $3,500, the AE function would by s . (Round your response to the nearest dollar) By how much does national income change? Equilibrium national income would change by $ . (Round your response to the nearest dollar.)NAME SECTION# PRINT LAST NAME, FIRST NAME DEMAND AND SUPPLY SHIFTS Match the graph showing a demand or supply shift with the event that would cause the shift. Graph 1 Graph 2 P P PI Dz DI DI Q1 Q2 Q1 Q2 Q Graph 3 Graph 4 P Sz. SI P2 P P2 D DI Q1 Q2 Q Q1 Q2 Q + Graph # Events: 1. A decrease in the price of a good considered a substitute by consumers 2. An increase in the price of a good considered a substitute by consumers 3. An increase in the costs of production 4. A decrease in the costs of production 5 . A decrease in the price of a good considered a complement by consumers 6. An increase in the price of a good considered a complement by consumers 7. Improved production technology 8. A decrease in consumer income, assuming the product is a normal good A decrease in consumer income, assuming the product is an inferior good 9. An increase in consumer income, assuming the product is a normal good 10.NAME SECTION# PRINT LAST NAME, FIRST NAME DEMAND AND SUPPLY Assume there is an increase in the price of a cereal. According to the law of demand, what happens in the market for cereal when the price of a cereal increases, ceteris paribus? Now assume cereal and milk are complements. What happens in the market for milk when the price of cereal increases, ceteris paribus? Starting from equilibrium in the market for milk, explain how an increase in the price of cereal affects equilibrium price and quantity in the market for milk, ceteris paribus. 12 Draw a graph of the market for milk, labeling both axes and the demand and supply curves. Show any shift(s) that occurred as a result of the increase in the price of cereal
