Econ25

Final Exam Economics 252 Financial Markets Prof. Robert J. Shiller May 11, 2007 in that location are four parts to this exam. In each part, closure s level of the disco biscuit questions, four minutes each, 112 minutes total. You amaze three hours to do the exam. Exam is not open book. destiny I. Answer any seven of the following ten riddle questions, 4 minutes each (It is enough to show an chemical formula for your answer without doing the final arithmetic). 1. Between April 24, 2007 and May 7, 2007 there were ten trading days and the Dow Jones Industrial Average closed up 9 times and closed down only 1 time. a. Assuming a random walk, what is the probability of the stock marketplace showing this many increases in any ten day period? b. Is this convincing evidence that stock footings are not a random walk? Explain 2. Argent College has an quaint endowment that consists exclusively of one silver mine that produces $10 million of silver each year. Unfortunately, the mine will be exhausted after 25 years ($250 million) and will shoot to shut down forever. The college plans to stay in business as an educational institution forever. The college can borrow and lend at the riskless rate, which is always 5% a year. Expenses for educating one learner for one year are $50,000, and will remain dictated at that level forever.

Argent College pledges never to raise its tuition. in that respect are 1000 students. Using the income from the endowment to help pay expenses, what tuition must the College charge per year to break even? 3. fanny owns one call for 100 shares of IBM stock with hear price of $110 and one put for $100 shares of IBM with mint price of $90. The price of a share of IBM stock is $104. some(prenominal) mature one year from now. a. Which of his options is in-the-money? b. Does John hope for the price of IBM to go up or down? Explain c. Does John hope for big economic news or a quiet time for the next year? Explain. d. Can you suppose of another portfolio of puts and calls for which John would have the opposite hope... If you want to go bad a full essay, order it on our website: Orderessay

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