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Suppose that as an owner of a federally insured S&L in the 1980s the price of real estate falls, and most of your loans go into default. In fact, so many loans go into default that the net worth of the S&L is a negative($5 million). Federal regulators haven't realized this yet, but they will shortly. As a a last-ditch attempt to save the bank, you attract $1 million in new deposits w/very generous interest rates to depositors. You have 2 possible investments you can make w/the $1 million. You can invest in stock market, which will pay $4 million w/probability 0.5 and $2 million w/probability 0.5. Alternatively, you can invest in junk bonds, which pay off $10 million w/probability 0.1 and $0.5 million w/probability 0.9.
a. Which investment has the highest expected value to an ordinary investor? Show your calculations.
b. Which investment has the highest expected value to you, the S&L owner? Show your claculations.
What price will the monopolist charge and how much output will he produce? Sketch a diagram of this market and show the equilibrium price and quantity. In addition, calculate the firm's profits.
Show the weekly relationship among output also number of workers for a factory with a fixed size of plant.
Suppose you earn $1 million over your working life and the real interest rate for retirement saving is 50%. How much will you save and how much will you consume in each part of your life?
You are a division manager at Toyota. If your marketing department estimates that the semiannual demand for the Highlander is Q = 150,000 - 1.5P, what price should you charge in order to maximize revenues from sales of the Highlander?
Assume there are 12 firms in an industry. The percentage of total sales is given in the following table:
Smith has been informed that on April 1st, Delta Co., a producer of a substitute good, will be decreasing the price of its product by 10%. Given a cross elasticity of 2 and the following information answer the following questions. For this proble..
Find information on GDP and its components and calculate the percentage of GDP for the following components for 1950, 1980 and 2005:
Describe the effect of a third party payer system on equilibrium price and quantity. I have a neighbor who had bi-pass surgery that cost us all $150,000 and he was ninety years old.
Assume one firm buys another firm. Elucidate what issues might arise as they attempt to merge their respective performance management systems.
The table below contains data from the Bureau of Economic Analysis (BEA) on real GDP in the United States for 1980 to 1984. During this period, the United States experienced economic fluctuations (one recession and periods of economic growth).
Which country is capital abundant according to the Heckscher-Ohlin theorem? Given your answer to (a), draw the PPF for Canada. Also draw the indifference curve and the relative price line for the no-trade equilibrium.
You are given the following information concerning Freedonia, a legendary country, Determine the marginal propensity to consume in Freedonia, and what is the marginal prosperity to save?
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