Finance 30220
Solutions to Practice Midterm #1
1) Suppose that the return on a 90-day T-Bill is .6% while the total 10 year return on a 10 year
T-Bond is 22%. Which of these two assets has the better
Finance 30210
Problem Set #10
1)
a) Calculate the expected value and standard deviations of the two gambles.
E ( A) = .70($100 ) + .30( $200 ) = $10
SD( A) = .70($100 $10 ) + .30( $200 $10 ) = $137
2
Finance 30210
Problem Set #9
1) The two most common paradigms for strategic interaction betweens firms are
cournot competition and Bertrand competition. Briefly describe the assumptions
underlying the
Finance 30210
Problem Set #8
1) Consider the familiar Rock, Paper, Scissors game. Two players indicate either
Rock, Paper, or Scissors simultaneously. The winner is determined by
Rock crushes scissors
Finance 30210
Problem Set #7
1) Suppose that you have an industry with 5 firms. Below are the market shares of each
firm:
Firm
1
2
3
4
5
Market Share
35
25
15
15
10
a) Calculate the concentration rati
Finance 30210
Problem Set #5
1) For each of the following demand curves, calculate the price elasticity of demand
and the income elasticity of demand.
a) Q = 800 4 P + 2 I
Price Elasticity: p =
P
%Q Q
Finance 30210
Problem Set #3
1) According to a study by Niccie McKay, the average cost per patient day for nursing
homes in the US is
C = A .16 X + .00137 X 2
We want to minimize the cost per patient
Finance 30210
Problem Set #2
1) Suppose you are thinking about starting a lawn service in your area. The lawn service market
can be considered perfectly competitive. You own a $200 lawnmower. You have
Finance 30210
Problem Set #1
1) Suppose that you are currently leasing your office space for $130,000 per year. You
have the opportunity to buy the facility for $1.8M. With a 10% down payment, you
can