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Jeff holds $50,000 wealth which has a utility of 7.07 utils (assuming utility is the square root of wealth in thousand dollars). He considers investing this in a gamble which has a 0.6 probability of increasing his total wealth to $100,000 and 0.4 probability of decreasing it to $30,000. What will be Jeff's expected utility from the gamble?
Mr. Smith Wishes to sell a bond that has a face value of $1,000. The bond bears an interest rate (coupon rate) of 7.5%, with bond interest payable semiannually. Four years ago, the bond was purchased at $900.
Charlie has the utility function U(xA, xB) = xAxB. His indifference curve passing through 35 apples and 18 bananas will also pass through the point where he consumes 10 apples and bananas.
An industry consists of two firms, each of which have variable costs of $10 per unit but no fixed costs. The industry demand curve is P = 70 - Q. Solve for the Cournot equilibrium. In doing so, derive the reaction function of each firm (call Q1 an..
Suppose that the money demand is given by: Md = PY(0.25 i) Suppose that nominal income is $100 and wealth is $500 and that the money supply is set by the central bank at s = 20. a. Derive the demand for bonds.b. Draw the supply and the demand of mon..
a firm has the oppurtunity to invest in a project having an initial outlay of $20,000. net cash inflows(before depreciation and taxes) are expected to be $5,000 per year for five years. the firm uses the straight-line depreciation method.
The 1-year interest rate in the U.S. is 10%; in Switzerland it is 12%. The current spot rate (dollars per franc) is $0.40. a. What do you expect the 1-year forward rate to be b. Is the franc selling at a premium or discount
The university is selling bonds to cover the cost of a new power plant for UAF. The face value on the bonds is $100 million and is to be repaid in 10 years with coupons paid annually. There is a 15% chance the effective interest rate will be 5%, 2..
Suppose that the market (in the graph above) is initially in equilibrium. Assume that consumer preferences shift and people want more of this product, and, at the same time, producers get an improvement in technology which lowers their production ..
Suppose you are considering adding another sales associate to the floor. Your current total sales are $40,000 per day and your cost of sales, including the sales associates are $66,000 per day. The new sales associate should increase sales
Consider a worker who is paid a wage of $20 per hour. The worker has a disutility h^2 of working h hours. Assume that the worker faces a tax rate t. Thus, his net (after-tax wage rate is $20 (1 - t)). How many hours will the worker work if his obje..
Show this utility maximiz- ing combination combination of Pepsi and Coke on the graph. how would her consumption and utility maximizing bundle of Coke and Pepsi change if the price of Coke decreases to 50 cents.
Raider Inc., an American importing firm anticipates an outflow of ¥893 million in 6 months. Raider's management team is worried about the course of the ¥/$ exchange rate over the next 6 months and decides to hedge.
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