Economics Answers

As an active investor in the Bond market, Johnny purchased a sum of bonds at a yield

of 12 percent p.a. Attached below is the bond purchase agreement between him and

MWAM Bank Berhad:

BOND PURCHASE AGREEMENT

Bond Name:

Green Initiative- MWAM 2010 Bond

Transaction Date: February 05, 2020

Account Reference: MWAMXT19789-01

Account Type: Conventional

Bond Term: 20-year Coupon

Interest: 8.00%

Issuance Date: March 15, 2010

Type of Bond: Straight

Par Value: RM1,000

Maturity Date: March 15, 2030

Coupon Date: Every March 15 and September 15

Consideration: By making PAYMENT, you agree to the Terms and Conditions set out as attached with this Purchase Agreement.

You are required to:

i) Compute the Book value on the transaction date.

ii) Determine the current yield on the date of purchase.

You were planning to spend Saturday working at your part-time job, but a friend asks you to go skiing. What is the true cost of going skiing? Now suppose you had been planning to spend the day studying at the library. What is the cost of going skiing in this case? Explain

The 12% rate bond of Rs 1,000 face value has a current market value of Rs 1,044.57 and a yield to maturity of 10.8%. Maturity in 5 years. Calculate duration and modified duration

Empire Ltd needs Rs 10,00,000 to build a new factory which will yield EBIT of 1,50,000 per year. The company has to choose between two alternative financing plans. 75% equity and 25% debt and 50% equity and 50% debt. Under the first plan the shares can be sold for Rs 50 per share and the interest rate on the debt will be 14%. Under the second plan shares can be sold for Rs 40 per share and the interest rate on debt will be 16%. Determine the EPS for each plan assuming a tax rate of 35%

According to what you've learned about the price elasticity of demand, do you think that education in community colleges has an elastic or inelastic demand? Why? Explain your answer

Molly has a $2500 down payment saved for this purchase, and the dealer’s $1500 Cash Allowance will come straight off her total. How much will Molly’s monthly payment be? 

A consumer purchases two goods, food and clothing. The utility function is U=FC where

F denotes the amount of food consumed and C the amount of clothing. The price of food

is PF=2,000 Birr, the price of clothing is PC=4,000 Birr, and the income M=80,000. Find

the equilibrium of this consumer.

Discuss the evolution of banks and the functions of the financial system.

3. A cloth producing firm in a perfectly competitive market has the following short-run total cost function: TC = 6000 + 400Q – 20Q2 + Q3 . If the prevailing market price is birr 250 per unit of cloth, A) Should the firm produce at this price in the short-run? B) If the market price is birr 300 per unit, what will be the profit (loss) of the firm at equilibrium? Should the firm continue to produce or not? C) Calculate the shut-down price of this firm?

4. Assume a wheat producing farmer engaging in selling its product under perfect competition market faces cost functions as TC= Q3 -2Q2 +8Q and Average revenue of the farmer is given as Birr 8 . Having this information, A) Determine the optimal level of output and price in the short run. B) Calculate the economic profit (loss) the farmer will obtain (incur) C) What will be the minimum price level the farmer gets to continue in wheat production