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Please See attachment and provide answers as well as solutions for computational problems (USE FORMULAS)

CH6 DLQ Due in Dropbox by 7:00 PM on Monday, March 28. Name:______________________________________ If your name is not here, you will not get credit for this. If the efficient markets hypothesis is true, how will each of the following events affect the relevant asset or security price? a. IBM announces profits of $100 million. Stock analysts had predicted profits of $300 million. b. IBM announces profits of $300 million. Stock analysts had predicted profits of $300 million. c. IBM announces a merger with Dell Computer. The deal is so complex that only financial analysts and other financially sophisticated people can correctly assess that it will make both firms more efficient and profitable. The average person is simply confused. What happens to the price of IBM stock? d. The price of IBM stock has risen every day for the past three days. What should happen on the fourth day? e. Your investment advisor calls and tells you that IBM stock is significantly undervalued, so you should buy it. What will likely happen to the price of IBM stock in the future? f. Your investment advisor calls and tells you that the price of IBM stock has risen significantly each of the past two Fridays. She suggests that you buy it on Thursday this week. What will likely happen to the price of IBM stock on Friday? g. A new Federal Reserve chairman is appointed and will take office in three months. The future chairman announces that when she takes over, she plans to tighten monetary policy and raise interest rates. Three months later, she takes her position. What happens to the stock market when she takes over and implements her policy? Chapter 14 Distance Learning QUIZ! Due in dropbox by 7:00 PM on Monday, March 28. NAME:__________________________________________ If your name is not here, you will not get credit for this. 1. Compute the required monthly payment on an $80,000 30-year fixed-rate mortgage with a nominal interest rate of 5.80%. How much of the payment goes toward principal and interest during the first year? 2. Consider a 5-year balloon loan for $100,000. The bank requires a monthly payment equal to that of a 30-year fixedrate loan with a nominal annual rate of 5.5%. How much will the borrower owe when the balloon payment is due? 3. What are discount points and why do some mortgage borrowers choose to pay them? 4. Consider a 30-year, fixed-rate mortgage for $250,000. If you could get a lower interest rate by paying 2 discount points up front, what is the amount you would need at closing to cover this? 5. A mortgage on a house worth $350,000 requires what down payment to avoid PMI insurance? Chapter 15(1) Distance Learning QUIZ! Due in dropbox by 7:00 PM on Monday, March 28. NAME:__________________________________________ If your name is not here, you will not get credit for this. For each of the following determine if the group indicated would be happy or unhappy with the situation if the U.S. Dollar appreciated. Explain why. a. Dutch pension funds holding U.S. government bonds. b. U.S. manufacturing industries. c. Australian tourists planning a trip to the U.S. d. An American firm trying to purchase property overseas. Multiple choice: 1. Other things the same, if the exchange rate changes from 41 Thai bhat per dollar to 35 Thai bhat per dollar, the dollar has a. c. depreciated and so buys more Thai goods. b. 2. appreciated and so buys more Thai goods. appreciated and so buys fewer Thai goods. d. depreciated and so buys fewer Thai goods. In the United States, a three-pound can of coffee costs about $5. Suppose the exchange rate is about 0.8 euros per dollar and that a three-pound can of coffee in Belgium costs about 3 euros. What is the real exchange rate? a. c. 3/4 cans of Belgian coffee per can of U.S. coffee b. 3. 5/3 cans of Belgian coffee per can of U.S. coffee 4/3 cans of Belgian coffee per can of U.S. coffee d. 3/5 cans of Belgian coffee per can of U.S. coffee Suppose the same basket of goods costs $100 in the U.S. and 50 pounds in Britain. According to purchasing power parity, what is the nominal exchange rate? a. 4. 2 pounds per $ 1/2 pound per $ d. 12 pound per $ 7.2 yuan b. 6 yuan c. 5 yuan d. 3.6 yuan 960 pesos per pound. b. 1,200 pesos per pound. c. 1,500 pesos per pound. d. None of the above is correct. If the U.S. price level is increasing by 3 percent annually and the Swiss price level is increasing by 5 percent annually, by what percent would the dollar price of francs need to change according to purchasing power parity? a. 7. c. Suppose the real exchange rate is 4/5 pounds of Chilean beef per pound of U.S. beef, a pound of U.S. beef costs $2 and the nominal exchange rate is 600 Chilean pesos per dollar. It follows that Chilean beef costs a. 6. 1 pound per $ In the U.S. a candy bar costs 50 cents. The nominal exchange rate is 6 Chinese yuan per dollar. If the real exchange rate is .60, what is the price of a candy bar in China? a. 5. b. decrease by 5% b. decrease by 2% c. increase by 5% d. increase by 2% According to the purchasing-power parity theory, if a McDonald's Big Mac costs 2 dollars in the US and 8 francs in Switzerland then the nominal exchange rate should be a. 16 francs per $ b. 10 francs per $ c. 4 francs per $ d. 1/4 francs per $ Chapter 15(2) Distance Learning QUIZ! Due in dropbox by 7:00 PM on Monday, March 28. NAME:__________________________________________ If your name is not here, you will not get credit for this. Graphing: 1. What if investments elsewhere become riskier relative to the U.S.? Show the results graphically and also explain. 2. As the popularity of American-made films increases worldwide, what should happen to the value of the dollar? Illustrate your answer using a supply and demand graph and also explain. 3. During the 1990s, growth in the United States exceeded growth in the rest of the world, and the U.S. stock market boomed relative to stock markets in other parts of the world. List the various ways this discrepancy in economic conditions could have affected the value of the dollar. Which of them do you think were more important? Illustrate your answer graphically and also explain