Solve the following questions.,

Answerall:

32. Judy decides to take a short position in 20 contracts of S&P 500 futures. Each contract is for the delivery of 250 units of the index at a price of 1500 per unit, exactly one month from now. The initial margin is 5% of the notional value, and the maintenance margin is 90% of the initial margin. Judy earns a continuously compounded risk-free interest rate of 4% on her margin balance. The position is marked-to-market on a daily basis. On the day of the first marking-to-market, the value of the index drops to 1498. On the day of the second marking-to-market, the value of the index is X and Judy is not required to add anything to the margin account. Calculate the largest possible value of X. (A) 1490.50 (B) 1492.50 (C) 1500.50 (D) 1505.50 (E) 1507.50 IFM-01-18 Page 16 of 105 33. Several years ago, John bought three separate 6-month options on the same stock. Option I was an American-style put with strike price 20. Option II was a Bermuda-style call with strike price 25, where exercise was allowed at any time following an initial 3-month period of call protection. Option III was a European-style put with strike price 30. When the options were bought, the stock price was 20. When the options expired, the stock price was 26. The table below gives the maximum and minimum stock price during the 6 month period: Time Period: 1$ 3 months of Option Term 2" 3 months of Option Term Maximum Stock Price 24 28 Minimum Stock Price 18 22 John exercised each option at the optimal time. Rank the three options, from highest to lowest payoff. (A) I> II > III (B) I > III > II (C) I > I > III (D) III> I> II (E) III > II > IMany elderly people in the US receive Social Security payments as their sole source of income. Because of this, there have been attempts to adjust these payments so as to keep up with changing prices (ination). This process is called \"indexing\"; this question will lead you through the process. Suppose that in the year 2018, a typical Social Security recipient consumed only Food (F) and Housing (H). The price of housing was $150 / unit and the price of food was $50 /unit. Denote the quantities of food and housing per month by F and H respectively. This consumer received $1500 / month and consumed 5 units of housing and 15 units of food. (3.) Write out the consumer's budget constraint and demonstrate that the bundle chosen falls on that budget constraint. (b) Draw the budget constraint on a graph (Housing on the horizontal axis) with the optimal bundle labeled. Draw the indierence curve through that optimal bundle. Assume preferences are well behaved. 3. Suppose the production function for widgets is given by q = kl - 0.8k' - 0.21 where q represents the annual quantity of widgets produced, k represents annual capital input, and I represents annual labor input. a) Suppose k = 10; At what level of labor input does this average productivity reach a maximum? How many widgets are produced at that point? b) Again assuming that k = 10, at what level of labor input does MPL= 0? c) Suppose capital inputs where increased to k = 20. How would your answers to parts (a) and (b) change? d) Does the widget production function exhibit constant, increasing, or decreasing returns to scale?1. Distinguish between an absolute advantage and a comparative advantage. Cite an example of a country that has an absolute advantage and one with a comparative advantage. 2. What effect does devaluation have on a nation's currency? Can you think of a country that has devaluated or revaluated its curency? What have been the results? 3. What effect does a country's economic development have on international business? 4. How do political issues affect international business? 5. What is an import tariff? A quota? Dumping? How might a country use import tariffs and quotas to control its balance of trade and payments? Why can dumping result in the imposition of tariffs and quotas? 6. How do social and cultural differences create barriers to international trade? Can you think of any additional social or cultural barriers (other than those mentioned in this chapter) that might inhibit international business? 7. Explain how a countertrade agreement can be considered a trade promoter. How does the World Trade Organization encourage trade? 8. At what levels might a firm get involved in international business? What level requires the least commitment of resources? What level requires the most? 9. Compare and contrast licensing, franchising, contract manufacturing, and outsourcing 10. Compare multinational and global strategies. Which is better? Under what circumstances might each be used?3. Equilibrium with "Bads." Consider an exchange economy that contains two consumers with utility function of the form Vie {1, 2}: (5) defined over consumption set [0, 5] x [0, 3] C R4. Notice that the second com- modity is "bad." Endowments are given by w = (1,3) and wy = (3, 1). (a) Show that feasible allocation r is Pareto optimal if and only if ru tra = 4