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MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter13: Monetary Policy: Conventional And Unconventional

Section: Chapter Questions

Problem 2TY

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A producer holding a commodity is said to be _______________ and could hedge by going __________ a futures contract

a. Long long

b. Long short

c. Short short

d. Short long

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Question 2: Assume that the risk-free rate, RF, is currently 8%, the market return, RM, is 12%, and asset A has a beta, of 1.10. (could be done on word document or excel). Draw the security market line (SML) Use the CAPM to calculate the required return, on asset A. Assume that as a result of recent economic events, inflationary expectations have declined by 3%, lowering RF and RM to 5% and 9%, respectively. Draw the new SML on the axes in part a, and calculate and show the new required return for asset A. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 2%, to be14%. Ignoring the shift in part c, draw the new SML on the same set of axes that you used before, and calculate and show the new required return for asset A. From the previous changes, what conclusions can be drawn about the impact of (1) decreased inflationary expectations and (2) increased risk aversion on the required returns of risky assets?
you are cattle feeder concerned abount rising corn (and feed ) cost . the march contract is trading at $ 4.29/bu. during the month of january and february , you expect to be able to buy corn at basis of$ -0.28/bu. you buy the march contract the look in price corn . when the time comes to unwind your hedge, the following prices prevail : $4.94/bu march futures and $4.69/bu cash price. what price did you ectually pay for corn? (a) $4.69/bu (b)$ 4.01/bu (C)$ 4.94/bu (d)$ 4.16/bu
which of the following describes tailing the hedge? a) a more exact calculation of the hedge ratio when futures contracts are used for hedging b) a strategy where the hedge position is increased at the end of the life of the hedge c) a strategy where the hedge position is increased at the end of the life of the futures contract d) a strategy works in derivatives markets
Explain why you would be more or less willing to buygold under the following circumstances:a. Gold again becomes acceptable as a medium ofexchange.b. Prices in the gold market become more volatile.c. You expect inflation to rise, and gold prices tend tomove with the aggregate price level.d. You expect interest rates to rise.
Consider an investor based in the FC that invests in the DC. To hedge the FX risk the FC investor could (select all that are true): A. Engage in a swap for DC at the investment's open date to FC at the invesment's close date B. Engage in a forward DC to FC with an unnknown counter party and no escrow (margin) C. Write a call option FC to DC at today's spot FX rate D. Write a put option FC to DC at today's spot FX E. Exercise a futures contract DC to FC at the date of the investment return trip F. Purchase a futrues contract FC to DC for the return trip Detailed Explanation Please, Thank you!
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)
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
A hedger trades futures to protect a price and ensure a margin for a cash commodity while a speculator trades futures to profit strictly from a change in price. A. True B. False
(1) which of the following assets is traded only in an over the caunter market? (a) stocks (b) comodities (c) treasuri bonds (d) all of the above (e) none of the above
In financial economics, __________ is a concept that refers to the reduction in investment risk that can be achieved by combining various financial assets in a portfolio. It is a fundamental element of modern portfolio theory. A) DiversificationB) ArbitrageC) LeverageD) Speculation
Pls help with below homework. Selct the correct option : One of the main causes of the 2007-2008 financial crisis was the housing bubble created by relaxed mortgage lending standards accompanied by government guarantees in case of defaults. A) True B) False
1. When the price of the underlying financial instrument exceeds the exercise [strike] price of a call option, the option is said to be: *a. ripe for a put.b. out of the running.c. in the money.d. dead on the money. 2. An option that gives the holder the right to sell a stock at a specified price at some time in the future is called a (n) *a. Put optionb. Covered optionc. Out of the money optiond. Call option 3. When a company proposes to issue its shares to its existing shareholders, it is called a (n) *a. Rights issueb. Initial public offeringc. Private placementd. Secondary issuance

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