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"Suppose you have $10,000 to invest. A broker phones you with some information you requested on certain junk bonds. If the company issuing the bonds posts a profit this year, it will pay you a 40 percent interest rate on the bond. If the company files for bankruptcy, you will lose all you invested. If the company breaks even, you will earn a 10 percent interest rate. Your broker tells you there is a 50 percent chance that they will break even and a 20 percent chance that the company will file for bankruptcy. Your other option is to invest in a risk-free government bond that will guarantee 8 percent interest for 1 year.
a. What is the expected interest rate for the junk bond investment?
b. Which investment will you choose if your utility function is given by U = (M2)?
c. Which investment will you choose if your utility function is given by U = (√M)?
Touchie MacFeelie's production function is 0.1J1/2L3/4 where J is the number of old jokes used and L is the number of hours of cartoonist's labour. He is stuck with 900 old jokes for which he paid $6 each. If the wage rate for cartoonists is $5 per h..
Explain how the Bureau of Labor Statistics determines who is unemployed and how the unemployment rate is calculated. How might the growth of the number of discouraged workers be reflected in the unemployment rate? How might the unemployment rate be i..
You are an economic advisor to the government of China in 2008. The country has a current account surplus and is facing gathering inflationary pressures. China’s government would like to attract workers from the rural countryside into manufacturing e..
If Mercedes Benz realizes that its annual demand for 500SEL model is 50,000 and their cost of order preparations is $42,000.00 and the inventory carrying cost per car per year is $3,600.00. What will be the Economic Order Quantity?
Who made up the Grange also Illustrate what effect did they have on the writing of the Texas constitution.
q1. explain why do some economists consider that better inventory control software as well as systems might help to
Define the opportunity cost of getting your degree by analyzing what steps and economic factors a potential student must make when choosing to pursue an education. Given your answer, is getting a formal college education worth your opportunity costs?..
Suppose that you have won a wrongful injury lawsuit and have been awarded $5 million dollars. However, the $5 million is going to come in two payments. The first payment is $3 million and will be paid in exactly one year. The remaining $2 million is ..
Production Functions and Marginal Products: How do inputs turn into outputs? Iso-quants/-costs and cost-minimization: What’s the best way to produce a given level of output? Supply: How does output respond to changes in output price, at the firm and ..
Syncretism is defined in the textbook as a combination of normally differing beliefs. This can mean the combination of religious beliefs or the combination of religious and cultural beliefs. Give two examples of religions, denominations, or sects tha..
If you were the angel investor, what is your certainty equivalent for these two projects? Are you risk-averse, risk-neutral, or risk-lover?
In calculating the incremental cost of a particular project, how would you treat the possible future costs of a lawsuit that may occur as a result of this project.
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