Now, let us assume that the realised uninformed trading demand is 60. That is, z=60. Let us also assume that the informed trader submits the trading demand, x, derived in Question 1.Calculate the dealers price (p()) if they follow their equilibrium strategy.

a. $10.03

b. $11.82

c. $12.00

d. Other

e. $10.00

Now, let us assume that the realised uninformed trading demand is 60. That is, z=60. Let us also assume that the informed trader submits the trading demand, x, derived in Question 1.

Calculate the informed traders realised profit ().

a. Other

b. $13.03

c. $5,200.30

d. $0.00

e. $73.03

Now, let us assume that the realised uninformed trading demand is 60. That is, z=60. Let us also assume that the informed trader submits the trading demand, x, derived in Question 1.

Calculate the dealers' realised profit (MM).

a. -$2,726.67

b. -$2,665.32

c. -$23.73

d. $0.00

e. Other

Now, let us assume that the realised uninformed trading demand is -60. That is, z=-60. Let us also assume that the informed trader submits the trading demand, x, derived in Question 1.

Calculate the dealers price if they follow their equilibrium strategy (p()).

a. Other

b. $9.67

c. $10.00

d. $10.18

e. $11.82

Consider a Kyle (1985) model set-up in which the true value of the stock is $12.00, the unconditional variance of the true value is 6, the variance of uninformed trading is 8,000 and the expected value of the stock is $10.00 without private information. That is: F = $12.00 o = 6.00 o = 8,000 F = $10.00 1