1. The price a dealer is willing to pay for a security held by an investor is called the a. Equilibrium price b. Ask price c. Bid price d. Bid-ask spread e. Capital gains yield 2. An agent who arranges the buying and selling of securities among investors is called a a. Broker b. Trader c. Capitalist d. Dealer

1. The price a dealer is willing to pay for a security held by an investor is called the a. Equilibrium price b. Ask price c. Bid price d. Bid-ask spread e. Capital gains yield 2. An agent who arranges the buying and selling of securities among investors is called a a. Broker b. Trader c. Capitalist d. Dealer

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.13P

See similar textbooks

Related questions

Q: Examine formally the following statement about insurance demand. Show that this statements hold…

Q: 13. Adverse selection refers to a. the phenomenon that occurs when one party in an exchange takes…

A: Adverse selection exhibits a situation or scenario where the one party to the market exchange…

Q: The most important developments that have reduced banks' cost advantages in the past twenty years…

A: BANKS Banks are the Financial institution which is legally licensed to receive deposits and provide…

Q: 7. What assumption is most important to reach the conclusion that government regulation of risk on…

A: 7. D The assumption that it's costly for firms to reduce risk For example, when a leather firm…

Q: 5 2.Asymmetric Information. Now let’s examine the impact of asymmetric information on…

A: Asymmetric Data/Information is, similarly as the term recommends, inconsistent, unbalanced, or…

Q: You manage a portfolio that is currently all invested in equities in companies in five major…

A: In this question we have to find out the S&P/TSX net gain or loss with the help of the above…

Q: The regulatory agency responsible for regulating the activities of life insurance companies is…

A: In the United States, different authorised are formed to deal with different financial issues like…

Q: 3. In the upcoming year, the income from your current job will be $50,000. There is a 0.5 chance…

A: Answer a) Expected loss is = 0.3(50,000 - 25000) =25000 x 0.3…

Q: 30. The problem of moral hazard arises because a. life is full of all sorts of risks. b. after…

A: In a market, a moral hazard refers to the situation of asymmetric information that may lead to…

Q: Which type of derivative reduces risk the most? Group of answer choices A. An options contact. B.…

A: Derivatives refers to the financial transaction between two parties on the basis of set value of a…

Q: Explain why you would be more or less willing to buy ahouse under the following circumstances:a. You…

A: Hi! Thank you for the question but as per guidelines, we only answer 3 subparts at a time. Kindly…

Q: Suppose that a bond sells for $1000 and earns $50 of interest. So the interest rate is 5 percent.…

A: Given: Bond sells for $1000 and interest rate is 5%.

Q: 6. Everything else held constant, a decrease in wealth A) increases the demand for stocks B)…

A: Wealth is the individual's net worth. It is the accumulation of money, assets held by an individual…

Q: In a market for assets, there are two types, AA and BB. Buyers value AA at $5,550 each and value BB…

A: Since the consumers do not care about the type of the asset. They will be willing to pay the…

Q: You are a crude oil dealer. You intend to sell 50,000 barrels of crude oil in December. Each…

A: Given, Barrels to be sold- 50,000 Barrels per contract- 2,000 Strike price of crude oil- $70 There…

Q: der a household with a wealth endowment of $5, and a MB of consumption of $1.71, 1.53, 1.39, 1.29…

A: The demand and supply of funds by households and firms depend on the interest rates. When the…

Q: 1. What is an example of a company that uses a signal to help sell its product. What is the signal?…

A: In economics, The concept of signaling is that one party (referred to as the "agent") sends…

Q: 1. Financial institutions in the U.S. economy Suppose Van would like to use $9,000 of his savings to…

A: In a market, a firm enters to make production and earn income from it. Production required capital…

Q: perhaps falling into a recession

A: Recession is a period of economic slowdown during which there is a significant decline in the level…

Q: A principal is __________ if __________ knows or has reason to know (1) that the agent is acting for…

A: At a marketplace, the relation between principal and agent is widely used when an individual has to…

Q: 4. Consider an office that there are some valuables which worth $250,000 (books and pipe dreams).…

A: To answer the question we need to compute the expected probability E(X)= Expected Probability E(x)=…

Q: 8. The uses of derivatives include: 1) Financial engineering for companies; II) Hedging for…

A: Derivatives includes instruments like options, futures. The value of these instruments are based on…

Q: 5. Explain how imperfect information problems such as adverse selection and moral hazard might…

A: a.) In this case, there is the problem of adverse selection as only the workers will know about…

Question

I need an explanation for questions 1 and 2

1. The price a dealer is willing to pay for a security held by an investor is called the

a. Equilibrium price

b. Ask price

c. Bid price

d. Bid-ask spread

e. Capital gains yield

2. An agent who arranges the buying and selling of securities among investors is called a

a. Broker

b. Trader

c. Capitalist

d. Dealer

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

The value of a portfolio to investors equals its expected return minus 35 times its variance. There is one stock in the economy. Rational investors believe that its expected return is 1. Irrational investors believe that its expected return is 1.8. All agree that the variance of the stock is 0.02. Graph on one graph the price of the stock as the number of shares go from 20 to 60 in three different circumstances: A: There are 260 investors, and all are rational. B: There are 260 investors. 200 are rational and 60 are irrational. Shorting is allowed. C: There are 260 investors. 200 are rational and 60 are irrational. Shorting is not allowed.
Please explain and give example how the futures market can reduce the chance that a trader can corner the market by delivery of a range of securities, and what's the meaning of "a trader can corner the market"? (Assume the reader only has some stock trading knowledge, you have to guide him to understand above mentioned topic easier)
Angie owns an endive farm that will be worth $90,000 or $0 with equal probability. Her Bernouilli utility function is u(w) =√w, where w is her wealth level (sum of initial wealth and the worth of the endive farm). 1. Suppose her firm is the only asset she has, that is, she has no initial wealth. What is the lowest price P at which she will agree to sell her endive farm before she knows how much it will be worth? 2. Redo part (1) assuming that she has $160,000 in her bank safe. 3. Compare and discuss your results in parts (1) and (2). What relationship can you find between Angie’s initial wealth level (zero versus $160,000) and her risk aversion?
Portray a utility function for money that “explains” why a person might buy a lottery ticket (and therefore appears risk acceptant) and also pur- chase a homeowner’s insurance policy (appearing risk averse).
Paul has a utility function of U =[ i to the power 1/2] with income measured in thousands. He will get a job that either pays 25 thousand a year or 64 thousand a year. What is his expected utility, expected payoff, the utility of his expected payoff, and her risk premium? Additionally, plot Paul's utility and income. Show and label his utility curve, his expected utility, and risk premium. Note: Please solve only the bolded part of the question. The previous part was already answered
1. Consider an insurance contract with the premium r=$200 and payout q=$800 a.) John has healthy-state income IH = $900 and sick-state income IS = $100. He has a probability of illness p = 0.2. Is the contract fair and/or full for John? b.) What is John’s expected income without this insurance contract? What is John’s expected income with this insurance contract?
ANSWER PART 4 PLEASE Consider the following portfolio choice problem. The investor has initial wealth w and utility u(x) = x^n/n . There is a safe asset (such as a US government bond) that has net real return of zero. There is also a risky asset with a random net return that has only two possible returns, R1 with probability 1 − q and R0 with probability q. We assume R1 < 0, R0 > 0. Let A be the amount invested in the risky asset, so that w−A is invested in the safe asset. What are risk preferences of this investor, are they risk-averse, risk- neutral or risk-loving? Find A as a function of w. Does the investor put more or less of his portfolio into the risky asset as his wealth increases? Now find the share of wealth, α, invested in the risky asset. How does α change with wealth?
D & R A1 9 - 2 Question 9. Price Sensitivity Hedge Mr. Toriop manages a bond portfolio valued at $27,492,045. The bonds in this portfolio have a face value of $25 million. The portfolio has a yield of 8.35 percent and a duration of 7.67. Mr. Toriop is worried that interest rates will rise within the next year. He would like to lower the duration of your bond portfolio to 5 years. He finds a one-year bond futures contract and thinks that it would be an appropriate hedge for your portfolio. This futures contract is priced at 109 17/32, has an implied yield of 8 percent, and has an implied duration of 7.9 years. The futures contract size is $100,000. How many contracts should Mr. Toriop use?
Financial institutions in the U.S. economy Suppose Kenji would like to use $6,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose RoboTroid, a robotics firm, is selling bonds to raise money for a new lab—a practice known as ____equity / debt_____finance. Buying a bond issued by RoboTroid would give Kenji ___a claim to partial ownership in / an IOU, or promise to pay, from___ firm. In the event that RoboTroid runs into financial difficulty,____the stockholders / Kenji and the other bondholders _____ will be paid first. Assuming that everything else is equal, a corporate bond issued by an electronics manufacturer most likely pays a ___higher / lower__ interest rate than a municipal bond issued by a state.
In the table, suppose the equal probabilities for weak economy and strong economy. Security B pays $600 if the economy is week and $0 if the economy is strong. Cash Flow in One Year Security Market Price Today Weak Economy Strong Economy Market index 1000 750 1350 Security B 600 0 Risk-free bond 1280 1350 1350 1) The expected return of security B is %. (Round to 2 decimal places) 2) The risk premium of security B is %. (Round to 2 decimal places) 3) Suppose a new security C has a Market Price Today = 2 * Security B + Risk-free bond, the equal probabilities for weak economy and strong economy. Security C pays $2250 if the economy is week and $1350 if the economy is strong, the expected return of security C is %. (Round to 2 decimal places)
Which of the following is NOT axioms of utility? A. Completennes B. Interdependence C. Continuity D. Innovation 2. What is the study of how investors react to certain ways to diversify a portfolio? A. Behavioral Finance B. Traditional Finance C. Utility Theory D. Trend Theory 3. What do you call an act and ways that are consistent with how the business world views moral principles and values? A. Ethical Behavior B. Organizational Factors C. Issues and Concerns D. Organizational Behavior
Consider an insurance contract with the premium r=$200 and payout q=$800. What is John’s expected income without this insurance contract? What is John’s expected income with this insurance contract?