What is the policy ineffectiveness proposition

Assignment Help Macroeconomics
Reference no: EM13907156

1. Use a diagram to explain the "new economics" proposition of monetary policy effectiveness. Describe the underlying assumptions of the new economics model. What is the policy ineffectiveness proposition?

2. Use the following figure:

1666_sort.png

a. to demonstrate the gains and losses to a short put and a long put on dollars with identical maturity dates, where the strike price is 0.50DM/$1, and the option premiums are identical at 0.05DM. Is there a net gain to short and long puts in this example? Why or why not?

b. Will a short put be exercised if the market price at maturity is greater than the strike price? Why or why not? Will a long call be exercised if the market price at maturity is lower than the strike price? Why or why not? Use properly labelled diagrams to support your answers. Assume that the strike price on each option is 4.2DM/$1, and that the option premiums are identical at 1.1DM/$1.

c. Explain the motives of both the seller and buyer of a straddle. Use properly labelled diagrams to support your explanation. Assume that the strike prices are 0.50DM/$1, that the option premiumon the call is 0.05DM/$1, and that the option premium on the put is 0.035 DM/$1.

Reference no: EM13907156

Questions Cloud

What memory bandwidth is required to support all 12 cores : You are asked to design a 12 core chip where each core is as described, and will run at 2GHz. What memory bandwidth is required to support all 12 cores? Look up current memory bus speeds - are they sufficient to our requirements?
What are the benefits to using this technology : What are the benefits to using this technology? What are the challenges to its utilization? Is this a "first generation" technology at this time, that is, are improvements already being developed or seen for the near future
What is the approximate forward exchange rate : Assume the current U.S. dollar-British spot rate is 0.6134£/$. If the current nominal one-year interest rate in the U.S. is 2.5% and the comparable rate in Britain is 3.5%, what is the approximate forward exchange rate for 360 days?
Explain concept of electronic health record migration path : Explain the differences between electronic health record implementation, adoption, and optimization. Explain the concept of an electronic health record migration path. Discuss how the electronic health record is not a single application or computer..
What is the policy ineffectiveness proposition : Explain the motives of both the seller and buyer of a straddle. Use properly labelled diagrams to support your explanation. Assume that the strike prices are 0.50DM/$1, that the option premiumon the call is 0.05DM/$1, and that the option premium o..
Use the following information to prepare a cash budget : Use the following information to prepare a cash budget for the month ended on March 31 for Gado Merchandising Company.
Assume that the risk free rate and the market premium : Assume that the risk free rate is 6% and the market premium is 5%. What are the betas of stocks X and Y?. What are the required rates of return on stocks X and Y?
Describe how this initiative supports patient quality care : Describe how this initiative supports patient quality care. Discuss whether it will help decrease healthcare costs. Explain how health informatics is critical to the initiative
An investment project has annual cash inflows : An investment project has annual cash inflows of $4,600, $3,700, $4,900, and $4,100, for the next four years, respectively. The discount rate is 13 percent. What is the discounted payback period for these cash flows if the initial cost is $5,500?

Reviews

Write a Review

Macroeconomics Questions & Answers

  As a production manager who understands the academic

As a production manager who understands the academic argument for free trade working in an company threatened by cheaper imports, how do you react.

  What would happen to autonomous consumption

What would happen to autonomous consumption if household debt fell and the interest rate rose over the same time period What would happen to autonomous consumption if real wealth increased and expectations of the future became more optimistic

  Investment project and estimation of economic

Determine which of the two investment projects of Problem 1 the manager should choose if the discount rate of the firm is 20 percent.

  Pricing elasticity and price strategy of demand

What is the hypothesized elasticity of demand for one product/service that is produced by the company (or a product/company you are familiar with)?

  Determine equivalent annual cost

A certain machine expenses $25,000 to purchase and install. It has salvage values and operating costs as demonstrate  in the table in the attached file. The salvage value of $20,000 listed at time 0 reflects the loss of installation costs at the time..

  Put policy on automatic pilot and needs that monetary policy

Suppose that, as the chair of the Fed, you decide to "put policy on automatic pilot" and needs that monetary policy follow an established rule.

  Finding price elasticity of demand

Graph the accompanying demand data, and then use the midpoint formula for Ed to determine price elasticity of demand elasticity of demand.

  What was the rate of return on the investment

An investment of $5000 in Biotech common stock proved to be very profitable. At the end of 3 years the stock was sold for $25000. What was the rate of return on the investment?

  Explain why do you think the labor supply curve

Explain why do you think the labor supply curve for very gifted or unique people is quite inelastic.

  1 economists are fond of saying that there is no free lunch

1. economists are fond of saying that there is no free lunch. what concept supports this belief?2. name two opportunity

  Finding optimal weekly output and price of firm

Find out the optimal weekly output and price of this firm. Find out the weekly profit from the production and sale of this product.

  Prices for cartelization level

Need Price for every cartelization level, market output, market profits, cartel output and profits, and need noncartel firm output and profit. This if for 5 companies.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd