Lecture Notes, U.C. Berkeley: Econ 210a, for
January 21, 2009
Economic Growth: The Ultimate
Birds-Eye View
J. Bradford DeLong
U.C. Berkeley
The Biggest Picture
Neoclassical economists like to make the heroic and not very well-
justied assumption that at t
Problem Set 3 Answer
SOLUTIONS TO PROBLEMS
4.2
(i) H0: 3 = 0. H1: 3 > 0.
(ii) The proportionate effect on salary is .00024(50) = .012. To obtain the percentage effect, we
multiply this by 100: 1.2%. Therefore, a 50 point ceteris paribus increase in ros is
Problem Set 2 Answer
SOLUTIONS TO PROBLEMS
3.4 (i) A larger rank for a law school means that the school has less prestige; this lowers starting
salaries. For example, a rank of 100 means there are 99 schools thought to be better.
(ii) 1 > 0, 2 > 0. Both L
Problem Set 1 Answer
SOLUTIONS TO PROBLEMS
2.4 (i) When cigs = 0, predicted birth weight is 119.77 ounces. When cigs = 20, bwght = 109.49. This is
about an 8.6% drop.
(ii) Not necessarily. There are many other factors that can affect birth weight, particu
Sessions 13 and 14
Risk and the cost of capital
30017 Corporate Finance
Lecture Slides, Academic Year 2015/2016
Sessions 13 and 14:
Risk and the cost of capital
Hannes Wagner
1
30017
-1-
Corporate Finance
Sessions 13 and 14
Risk and the cost of capital
To
Case Study Guidelines
Students are required to read closely the assessment criteria
for both case study presentation and written report as listed
on the course outline (page 7 to 9).
Case Study Questions
Cost of Capital at Ameritrade
1) What factors shoul
30017 Corporate Finance
Lecture Slides, Academic Year 2015/2016
Session 17:
Case study discussion Ameritrade
Hannes Wagner
The Ameritrade case is available in the Library Course Reserves.
Go to lib.unibocconi.it Course Reserves Search for course code 3001
Analysis of Cost of Capital at Ameritrade
Executive Summary
The CEO of Ameritrade, Joe Ricketts, is looking to invest a whopping US$ 155,000,000 increasing the
marketing budget and US$ 100,000,000 in technology enhancements. As such, he must justify this
201-046
Cost of Capital at Ameritra
Exhibit 1 Consolidated Annual Income Statements for the Fiscal Year Ending in September
Net Revenues
Transaction Income
Net Interest
Other
Total Net Revenues
$
1997
1996
51,936,902.00 $
18,193,946
7,107,492
77,238,340
3
MGT 6060 Financial Management
Summer 2011
Prof. Jonathan Clarke
Case 3: cost of Capital at Ameritrade
Group Members:
Kristin Fadeley
Venkata Kuppusamy
Benedikt Schroeder
Yogesh Vasisht
Manoj Vattakkunnel
Question 1: What factors should Ameritrade manageme
Case 6: Cost of Capital at Ameritrade
Summary:
Formed in 1971, Ameritrade Holding Corporation has been a pioneer in the deepdiscount brokerage sector, with its main sources of revenue being from transaction and
net interest. Virtually all of Ameritrades r
201-046
Cost of Capital at Ameritrade
Exhibit 1 Consolidated Annual Income Statements for the Fiscal Year Ending in September
1997
Net Revenues
Transaction Income
Net Interest
Other
Total Net Revenues
1996
1995
51,936,902.00
18,193,946
7,107,492
77,238,34
Macro Study Guide
Exam 1
First principles
1.) People face trade offs
a. Efficiency vs. Equality
i. Efficiency The property of society getting the most it can from its scarce
resources
ii. Equality The property of distributing economic prosperity uniformly
Chapter 22: Other Examples of Asymmetric Information
Question 1 a) The agent will report the sale price that minimizes the amount that he
must pay to the owner. One way of doing so is to report that the sale price is zero, since
under this report, his pay
Chapter 17: The Welfare Cost of Tax Interactions
a) The Marshallian demands can be found as the solution to a two equation system. Oneequation is the
budget constraint, and the other is the condition for a tangency between the budget constraint and an ind
Chapter 16: Taxation
Question 1
a) Robinson s budget constraint is:
c = 20h
Substituting this constraint into his utility function gives:
U = 20h h2
His utility is maximized when:
Robinson collects coconuts for 10 hours and consumes 200 coconuts. His util
Chapter 21: Regulation of a Natural Monopoly
a) Since raising revenue is costly, the government should set M as low as possible
is, M should be equal to e2. Under this rule, the net social value when is low is:
that
W = 12e 3e2
The best value of e satis e
Chapter 19: Asymmetric Information
Question 1 a) If is uniformly distributed on the interval [0, ], the average value of is /2. Here, is 1, so
the average value of is 1/2 and the average daily output of the workers is 3/2.
b) Since only the best workers l
Chapter 20: Preference Revelation
Question 1
Each person has the same marginal rate of substitution:
Substituting the marginal rates of substitution and the marginal rate of transformation into the Samuelson condition
gives:
For each person, consumption i
Chapter 18: The Theory of the Second Best
a)
The budget constraint is:
c = (1 t)h
Substituting the budget constraint into the utility function gives:
U
= 2(1 t)1/2h1/2 + z1/2 h
The utility-maximizing hours of work satisfy the condition:
implying:
h=1t
Sub
Chapter 5: Consumer and Producer Surplus
Question 1 The gure below shows the market before the government intervenes. Consumer surplus is the value
to consumers of q lifejackets less the amount paid for them. The value of the lifejackets to the consumers
Chapter 13: The Link Between Public Goods and
Externalities
Question 1
a) The marginal rates of substitution are:
and the marginal rate of transformation is:
so the Samuelson condition can be written as:
or equivalently:
(1) b) An allocation is Pareto opt
Chapter 10: Pure Public Goods
Question 1 The optimal quantity of the public good is provided when the sum of the fty people s marginal rates
of substitution is equal to the marginal rate of transformation. Since there are twenty people of the rst type and
Chapter 15: Pricing Rules under Imperfect Competition
Question 1
The highest price at which q units of goods can be sold is:
Firm 1 s pro ts are the difference between its revenues and its cost:
and its pro t-maximizing output satis es the condition:
Re-a
Chapter 9: Co-ordination Failures
Question 1
The gure above shows the graph of the relationship between n and m, as well as the graph of the equilibrium
condition. The intersection points of the two graphs are equilibrium group sizes. One of the equilibri
Chapter 8: Renewable Common Property
Resources
Question 1
a) The replacement of the manager has no immediate impact on the stock, but the newmanager increases the
number of boats to reach the mcp curve. Consequently, the state of the shery changes from F
Chapter 14: Monopoly
Question 1 a) The monopolist is maximizing its pro ts when it sets output so that marginal cost is equal to
marginal revenue. Marginal cost is the increase in total cost associated with an increase in output:
while marginal revenue is
Chapter 6: Externalities and Negotiation
a) If the rm has the property rights and there is no agreement, the rm will choose the level of output that
maximizes its pro ts , which are equal to the difference between its revenue from the sale of goods and it
Chapter 11: Two Examples of Public Goods
Question 1 a) Firm is pro ts are: The pro t-maximizing value of
xi e
Evaluating the derivative gives:
+ (n 1)xe
Re-arranging this equation gives rm is best response function: xi = 4 (n 1)xe
In a symmetric equilibri
Chapter 7: Permit Trading
Question 1
Abatement
Abatement costs under direct emissions controls are:
costs under
permit
trading differ in the two cases described
in the
text. Let
s
consider these cases in turn.
Case 1. In this case, abatement costs are:
Pe