Need Help with 14-15 please!!!
13. Because of overbuilding, commercial office towers are offering a year of free rent to tenants who sign a five-year lease. If you were a consultant to a potential tenant in the office towers, would you recommend that the tenant take the free year of rent in the first or the fifth year of the lease? Circle one: The FIRST YEAR or The FIFTH YEAR Briefly explain your choice here: 14. A farmer has two storage facilities for grain; a modern silo and an old shed. Grain stored in the silo is perfectly preserved, but grain stored in the shed suffers a 10% loss through spillage, spoilage, and rodent damage. The farmer's current crop is 10,000 bushels. The capacity of the silo is 6,000 bushels, while the shed can store the remaining crop. Suppose grain sells today for $1 per bushel, and will sell next year for $1.20. a. If interest rates are 10%, how much grain should he store in the silo, how much grain should he store in the shed to sell next year? The number of bushels the farmer should sell today is: The number of bushels the farmer should store in his shed to sell next year is: b. What is the maximum present value of his wealth from the optimal decision of whether to sell or store grain? The maximum net present value is: 5 c. Above what interest rate will the farmer elect to sell all 10,000 bushels today? The farmer should sell all 10,000 bushels today if the interest rate is higher than: d. Below what interest rate will the farmer elect to store all 10,000 bushels and sell them next year? The farmer should store all 10,000 bushels and sell them next year if the interest rate is lower than: 15. Given the current exchange rates listed in the table below, please tell me what the current exchange rate between China and Brazil that eliminates arbitrage opportunities (e.g. if you start with 1 U.S. dollar, convert it to Chinese Yuan, and then to Brazilian Real, and finally back to U.S. dollars, you end up with exactly 1 U.S. dollar). 1183315 Cinx The exchange rate that eliminates arbitrage opportunities is: 5.3108 13. Because of overbuilding, commercial office towers are offering a year of free rent to tenants who sign a five-year lease. If you were a consultant to a potential tenant in the office towers, would you recommend that the tenant take the free year of rent in the first or the fifth year of the lease? Circle one: The FIRST YEAR or The FIFTH YEAR Briefly explain your choice here: 14. A farmer has two storage facilities for grain; a modern silo and an old shed. Grain stored in the silo is perfectly preserved, but grain stored in the shed suffers a 10% loss through spillage, spoilage, and rodent damage. The farmer's current crop is 10,000 bushels. The capacity of the silo is 6,000 bushels, while the shed can store the remaining crop. Suppose grain sells today for $1 per bushel, and will sell next year for $1.20. a. If interest rates are 10%, how much grain should he store in the silo, how much grain should he store in the shed to sell next year? The number of bushels the farmer should sell today is: The number of bushels the farmer should store in his shed to sell next year is: b. What is the maximum present value of his wealth from the optimal decision of whether to sell or store grain? The maximum net present value is: 5 c. Above what interest rate will the farmer elect to sell all 10,000 bushels today? The farmer should sell all 10,000 bushels today if the interest rate is higher than: d. Below what interest rate will the farmer elect to store all 10,000 bushels and sell them next year? The farmer should store all 10,000 bushels and sell them next year if the interest rate is lower than: 15. Given the current exchange rates listed in the table below, please tell me what the current exchange rate between China and Brazil that eliminates arbitrage opportunities (e.g. if you start with 1 U.S. dollar, convert it to Chinese Yuan, and then to Brazilian Real, and finally back to U.S. dollars, you end up with exactly 1 U.S. dollar). 1183315 Cinx The exchange rate that eliminates arbitrage opportunities is: 5.3108
