£900. There are two bidders. The dealer believes that there are only three possible values, £7,200, £3,600, and £900, that each bidder’s willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities for each of the two bidders are independent of the other’s 4 valuation. Assuming that the two bidders bid rationally and do not collude, the dealer’s expected revenue from selling the car is at least
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A dealer decides to sell an antique automobile by means of an English auction with a reservation price of £900. There are two bidders. The dealer believes that there are only three possible values, £7,200, £3,600, and £900, that each bidder’s willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities for each of the two bidders are independent of the other’s 4 valuation. Assuming that the two bidders bid rationally and do not collude, the dealer’s expected revenue from selling the car is at least
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- You have determined that Tesla (TSLA) is worth $255.00, and that you would be willing to pay no more than $248.50 for it. However, the current bid price is $252.20 and the current ask price is $252.80. You will most likely submit which of the following orders? market order to buy at $255 limit order to buy at $248.50 limit order to sell at $252.80 market buy order at ask price limit order to buy at $252.20Suppose that X wants to purchase a boat from R. X is willing to pay up to $18,000, while R is not willing to accept any offer below $15,000. Assume that there are a finite number of negotiating rounds. How much should X offer for the boat? How does this offer differ from your r to part a, and why?Mrs Ireen Ndhlovu kaleji has US$ 2,000 which she is planning to exchange with Zambian Kwacha. She inquires from the bank and is given the following information: Ask price Bid price 1 USD K10 K9.5 1 ZWM K0.806 K0.79 The other information showed the following: Ask price Bid price 1 ZMW US$ 0.10 US$ 0.105 1 ZMW ZAR 1.241 ZAR 1.268 a) Explain to Mrs. Kaleji the differences of the quotations given above and the differences between BID and ASK prices in exchange rate b) How much Zambian kwacha is Mrs Kaleji expecting to be given by the bank if she sells US$ 2,000 and How much…
- Mr. John is watching an old game show rerun on television called Let’s Make a Deal in which the contestant chooses a prize behind one of two curtains. One of the curtains will yield a gag prize worth Rs.14,700/-, and the other will give a car worth Rs. 63,600. The game show has placed a subliminal message on the curtain containing the gag prize, which makes the probability of choosing the gag prize equal to 60 percent. What is the expected value of the selection? (a) Rs. 24,260; (b) Rs. 34,260; (c) Rs. 43,620; (d) Rs. 32,620; (e) Rs. 26,420Alexander Industries is considering purchasing an insurance policy for its new office building in St. Louis, Missouri. The policy has an annual cost of $10,000. If Alexander Industries doesn’t purchase the insurance and minor fire damage occurs, a cost of $100,000 is anticipated; the cost if major or total destruction occurs is $200,000. The costs, including the state-of-nature probabilities, are as follows: Using the expected value approach, what decision do you recommend? What lottery would you use to assess utilities? (Note: Because the data are costs, the best payoff is $0.) Assume that you found the following indifference probabilities for the lottery defined in part (b). What decision would you recommend? Do you favor using expected value or expected utility for this decision problem? Why?On August 1, 2021, Samonte offered to sell his only diamond ring for P50,000.00 cash to Banzon who was interested in buying the same. Samonte told Banzon that he was giving the latter up to August 31, 2021 to decide whether to buy the ring or not. Banzon agreed to the option and gave Samonte option money of P500.00. On August 18, 2021, Samonte found another buyer who was willing to pay P70,000.00 cash. Samonte personally visited Banzon to inform him that he was withdrawing his offer unless Banzon agreed to buy the ring for P70,000.00.A. Banzon is bound to pay P70,000.00 if he were to avail himself of his option to buy the ring.B. Samonte cannot withdraw the offer because the option is founded upon a consideration of P500.00.C. Samonte may validly withdraw the offer without being held liable for breach of contract since it would be unfair to him if he would receive only P50,000.00 as the price of his ring when another person is willing to buy it at a higher amount.D. Banzon needs to pay…
- Spike Equino is the CEO of a private medical equipment company that is proposing to sell 106,000 shares of its stock in an open auction. Suppose the company receives the bids in the following table. Shares Price 21,200 $86 10,700 84 15,700 79 26,200 76 10,700 75 8,700 73 15,200 72 15,600 71 30,600 67 a. What will be the company’s total receipts from the sale if the auction is a discriminatory auction? b. What if it is a uniform price auction?You are a U.S. importer and just placed an order of antiques worth £100,000 from a U.K supplier. You owe £100,000 to the U.K seller in one year. You are concerned about the dollar cost of this purchase in one year and decide to hedge your exchange rate risk using options. The current spot exchange rate is $1.45/£, and the forward exchange rate is $1.40/£. The U.S. interest rate is 2.00%, and the U.K. interest rate is 4.00%. A call option with a strike price of $1.40/£ is available with a premium of $0.10/£. A put option with a strike price of $1.40/£ is available with a premium of $0.08/£. What will be your total dollar cost of this purchase in one year with options hedge if the spot rate in one year turns out to be $1.50/£? Consider whether you will exercise your options if the future spot rate turns out to be $1.50/£. Enter the numeric portion of your answer. Give typing answer with explanation and conclusionThe bid and ask quotes for yen are 125-127 yen per dollar. Based on these quotes how many dollars need to be paid to the dealer to purchase 1 million yen?
- On September 1, 2020, Stone Company received an order to sell a machine to a customer in Australia at a price of 100,000 Australian dollars. Stone shipped the machine and received payment on March 1, 2021. On September 1, 2020, Stone purchased a put option giving it the right to sell 100,000 Australian dollars on March 1, 2021, at a price of $80,000. Stone properly designated the option as a fair value hedge of the Australian dollar firm commitment. The option’s time value is excluded in assessing hedge effectiveness, and the change in time value is recognized in net income over the life of the option. The option cost $2,000 and had a fair value of $2,300 on December 31, 2020. The fair value of the firm commitment was measured by referring to changes in the spot rate (discounting to present value is ignored). The following spot exchange rates apply: Date US Dollar Per Australian Dollar September 1, 2020 $.80 December 31, 2020 $.79 March 1, 2021 $.77 What was the net impact on…On September 1, 2020, Stone Company received an order to sell a machine to a customer in Australia at a price of 100,000 Australian dollars. Stone shipped the machine and received payment on March 1, 2021. On September 1, 2020, Stone purchased a put option giving it the right to sell 100,000 Australian dollars on March 1, 2021, at a price of $80,000. Stone properly designated the option as a fair value hedge of the Australian dollar firm commitment. The option’s time value is excluded in assessing hedge effectiveness, and the change in time value is recognized in net income over the life of the option. The option cost $2,000 and had a fair value of $2,300 on December 31, 2020. The fair value of the firm commitment was measured by referring to changes in the spot rate (discounting to present value is ignored). The following spot exchange rates apply: Date U.S. Dollar perAustralianDollar (AUD) September 1, 2020 $ 0.80 December 31, 2020 0.79 March 1, 2021 0.77…A UK oil trader, Teresa, is considering purchasing oil on the spot market for speculative purposes. The current spot price is $18 a barrel. However, she expects the price to decline to $16 a barrel in one month's time. If she bought on the spot market today, she would hold the oil for one month at a cost of £0.002 a barrel for the month, after which she could sell the oil on the spot market. The current US dollar exchange rate is $1.50/£. If she expects the exchange rate to be $1.30/£1 in one month's time, what is her expected gain/loss on the oil deal? A. £0.306 gain per barrel B. £0.027 gain per barrel C. £1.540 loss per barrel D. £6.202 loss per barrel
