Suppose that you are an Israeli citizen and had invested in a one-year U.S. bond that yielded 5 percent. The bond cost $5,000 and paid $5,250 at the end of the year. At the time you bought the bond, the exchange rate was 3.8 shekels/dollar
How many shekels did the bond cost? If the exchange rate fell to 3.5 shekels/dollar over this time period, what would the return on your investment be?
The bond cost 19,000 shekels and would have returned 19,950 shekels at the end of the year had the exchange rate stayed constant. However, at the end of the year, your investment was worth 18,375 shekels, so your effective rate of return on the investment was -625 / 19,000 = -3.3 percent.
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A firm should consume physical capital until:
A) the value of the total product of physical capital equals the price of physical capital. B) the value of the average product of physical capital equals the price of physical capital. C) the value of the marginal product of physical capital equals the price of physical capital. D) the value of the marginal product of physical capital equals the value of the marginal product of labor.
When are outcomes said to be independent? What is meant by the gambler's fallacy?
What will be an ideal response?
Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S2 (point E)
If the technology to produce motorcycles improves and the number of buyers increases, how will the equilibrium point change? A) The equilibrium point will move from E to C. B) The equilibrium point will move from E to A. C) The equilibrium point will remain at E. D) The equilibrium point will move from E to B.
A few years ago the news magazine The Economist listed some of the stranger explanations used in the past to predict presidential election outcomes
These included whether or not the hemlines of women's skirts went up or down, stock market performances, baseball World Series wins by an American League team, etc. Thinking about this problem more seriously, you decide to analyze whether or not the presidential candidate for a certain party did better if his party controlled the house. Accordingly you collect data for the last 34 presidential elections. You think of this data as comprising a population which you want to describe, rather than a sample from which you want to infer behavior of a larger population. You generate the accompanying table: Joint Distribution of Presidential Party Affiliation and Party Control of House of Representatives, 1860-1996 Democratic Control of House (Y = 0) Republican Control of House (Y = 1) Total Democratic President (X = 0) 0.412 0.030 0.441 Republican President (X = 1) 0.176 0.382 0.559 Total 0.588 0.412 1.00 (a) Interpret one of the joint probabilities and one of the marginal probabilities. (b) Compute E(X). How does this differ from E(X = 0)? Explain. (c) If you picked one of the Republican presidents at random, what is the probability that during his term the Democrats had control of the House? (d) What would the joint distribution look like under independence? Check your results by calculating the two conditional distributions and compare these to the marginal distribution. What will be an ideal response?