1.
What is the present discounted value of a coupon bond that pays $100
in one year and then a face value of $500 in two years time if the interest rate
is 0.10?
2.
Suppose that we live in a world of complete certainty. The interest
rate is known to be 5% and will be that forever. A particular company, Mantar
Inc, promises to pay a dividend equal to $8 every year, forever. It is known that
Mantar will pay this dividend and it will never change.
3. Suppose that the picture below depicts the cost structure faced by a
typical mushroom farmer.
A. Suppose that the farmer produces 30 logs (THIS IS NOT THE PROFIT
MAXIMIZING Q)
a. In the picture above, shade in the VC and the FC. Calculate the
farmer continues to produces 30 units. Show this area.
Show the
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 Fall '08
 GORDANIER
 Economics, Supply And Demand, $2, $50, $100, $8

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