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Suppose that you believe that recent strong employment data (~ 180,000 jobs added in November!) together with the prospect of a tax cut for corporations and wealthy families means that the Fed will start to increase interest rates sooner and faster than it has indicated in its recent open market committee meetings. However, you don't know whether: 1) the bull market in equities since summer 2009 will continue to charge ahead because of increased household incomes and consumer confidence; or, 2) will experience a major downturn because of investors' fears that higher interest rates will discourage corporate spending on physical capital and will kill the real estate rally. You notice that neither call nor put option premiums on at the money strike prices on the S&P 500 index have changed noticeably from average levels for at the money premiums on the index over the last year.
a) Describe an options strategy that you might wish to apply that is consistent with your expectations.
b) What assumption are you making about the volatility of S&P 500 stock prices " implied" by the current level of option premiums on the index?
Explain to your non-economist friends what this means, including considerations regarding the measurement of unemployment rates that can underestimate it. As a group of economic advisors in the campaign of an unnamed presidential candidate, what poli..
Economic efficiency is one of the underpinnings of the arguments for a market economy. What does economic efficiency mean? Illustrate with supply and demand curves a point where a market is operating efficiently.
Research conducted by Aperian Global identified five abilities that returning expatriates thought were necessary for a successful global leadership assignment, including
In a system in which there is an administered exchange rate, what is the term used when the government sets the rate higher to buy fewer units of foreign currency?
Brand X contains 20, 2 and 1 units of the minerals, while Brand Y contains 4, 1, 2 units of the minerals respectively. Brand X costs $18 per kg while Brand Y costs 6 per kg.
A 10 percent reduction in price that leads to a 5 percent increase in the amount purchased indicates a price elasticity of more than 1. Respond to the following questions: If you really like pizza, should you try to consume as much pizza as possible?..
Nominal GDP in Nowhereland in 2002 and 2003 increased from $4 trillion to $4.8 trillion. Can you say that the production of goods and services in Nowhereland has increased between 2002 and 2003? Why or why not?
Suppose the European Union (EU) is investigating a proposed merger between two of the largest distillers of premium Scotch liquor. Based on some economists’ definition of the relevant market, the two firms proposing to merge enjoyed a combined market..
Explain why it is not sensible to close a business firm if it earns zero economic profits. Under what circumstances might you expect the demand curve of the firm to be vertical, horizontal, and positively sloping?
In an interview with Daron Acemoglu, he says "the hot money which was floating through Turkey has stopped after FED's declaration that we are going to give much more attention on monetary policy". Basically I know some fundamental things like monetar..
How do segmentation of global financial markets, government incentives to attract direct foreign investment (DFI) and variation in national tax rates allow multinational corporations to lower their cost of capital compared to single country corporati..
Compare and contrast the way Classical and Keynesian theory determine the Demand for Money and how it is related to the Money Supply. As a part of your comparison, indicate which of these theories developed the concept of a Liquidity Trap and what th..
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