$100‚000. Be sure to draw the payoff and profit/loss diagrams before answering the questions. 1. Which breakeven point is correct? a. Call 2.0 b. Put 2.4 c. Call 2.4 d. Put 1.8 e. Put 2.0 2. If at maturity‚ the spot is 1.9R/$ at maturity‚ which option is exercised? a. Put‚ profit 10‚000R b. Call‚ payoff -30‚000R c. Call‚ payoff -10‚000R d. Put‚ payoff -30‚000R e. None of the above 3. Suppose that the spot is 2.3R/$ at maturity‚ which is true? a. Call‚ payoff 10‚000P b. Put‚ loss 10‚000R c
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B. Answers to Short-Answer‚ Essays‚ and Problems 1. What are the major features of monopolistic competition compared to pure competition and pure monopoly? In monopolistic competition‚ there are a relatively large number of firms‚ not the thousands of firms as in pure competition. The monopolistically competitive firms produce differentiated products‚ not the standardized products of pure competition. Product differentiation means that monopolistic competitors engage in some price competition
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positive one year from now. E19‚ Page 549: Solution: Statement (b) is correct. The appropriate diagrams are in Figure 20.6 in the text. The first row of diagrams in Figure 20.6 shows the payoffs for the strategy: Buy a share of stock and buy a put. The second row of Figure 20.6 shows the payoffs for the strategy: Buy a call and lend an amount equal to the exercise price. E27‚ Page 550: Solution: Consider each company in turn‚ making use of the put-call parity relationship: Value
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1. Deterministic techniques assume that no uncertainty exists in model parameters. 2. A continuous random variable may assume only integer values within a given interval. 3. A joint probability is the probability that two or more events that are mutually exclusive can occur simultaneously. 4. A decision tree is a diagram consisting of circles decision nodes‚ square probability nodes‚ and branches 5. Starting conditions have no impact on the validity of a simulation model. 6. A table of random
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Situation 1: The motorcycle helmet market has 13 companies‚ and four firm concentration ratio of 26%. While the helmets have a variety of designs‚ they are sold at very similar prices. Recently‚ the death rate from head injuries in motorcycle crashes has been rising. The producers advertise their helmets as “effective‚” but some helmets withstand most falls and others are produced with materials that are more likely to crack in commonly experienced falls. The weaker helmets cost about $8 less to
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Chapter 16 Financial Distress‚ Managerial Incentives‚ and Information 16-1. Gladstone Corporation is about to launch a new product. Depending on the success of the new product‚ Gladstone may have one of four values next year: $150 million‚ $135 million‚ $95 million‚ and $80 million. These outcomes are all equally likely‚ and this risk is diversifiable. Gladstone will not make any payouts to investors during the year. Suppose the risk-free interest rate is 5% and assume perfect capital markets.
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Review Assessment: Oefententamen Time Elapsed 1 hours‚ 2 minutes‚ and 57 seconds out of 1 hours and 30 minutes allowed. Instructions Question 1 A process involves transforming inputs into outputs. Selected Answer: Question 2 Labor productivity is an index of the output per person or hours worked. Selected Answer: Question 3 True True 1 out of 1 points 1 out of 1 points 1 out of 1 points As a functional area of a business‚ Operations translates materials and services into outputs. Selected
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Standard Deviation in the Business World QRB/501 Abstract On Standard Deviations in Job Performance The purpose of this study was to compare the expected payoffs from personnel programs based on standard deviation of job performances in dollars‚ the Global Estimation model‚ and the CREPID procedure. The study was done for route salesmen of a large soft drink bottling company. The Global Estimation model and the CREPID procedure were behaviorally based‚ where the standard deviation of job performance
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differentiated‚ acting as a key determinant on level of advertising. Secondly‚ the influence on pricing behavior that arises through the presence of barriers to entry. Augustin Cournot introduced one of the earliest models in 1838. He considered a ‘duopoly‚’ an industry with two firms. These two firms produce homogenous products‚ allowing
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The Attractiveness of Telecommunications Industry in 1998 Ireland The Irish telecommunications industry has been heavily regulated since the 1980s. A state-owned body‚ Bord Telecom Eireann‚ being simultaneously the largest employer in the country and the provider of the poorest quality Telecom Systems in Europe‚ introduced the controls that fundamentally eliminated the competition and created a monopoly. This seemingly new‚ but propitious industry faced numerous obstacles‚ as its capital requirements
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