Consider the situation where the stock price movements during the life of a European option are governed by a two-step binomial tree. Prove that it is not (always) possible to set up a position in the stock and the option that remains riskless for the whole of the life of the option by providing a simple example of a multi-step tree where delta changes.

Which of the following explains why the government sets a required reserve ratio for private banks? a. to allow the government to control the interest rate charged on loans. b. to prevent banks from printing too much money and causing inflation. c. to make sure banks don't run out of money when customers make withdrawals. d. to enable the regulation of risk levels in the decision process of offering loans. 2b2t

The prebisch–singer hypothesis concludes that: a. technology lowers the cost of manufactured products, so developing countries should see an increase in their terms of trade. b. developing countries experience a long-run decline in their terms of trade, as the demand for primary products in higher-income countries declines relative to their demand for manufactured goods. c. because of unfair trading practices, labor in developing countries is exploited. d. opec has been responsible for a slowdown in the world's standard of living.

The gilbert instrument corporation is considering replacing the wood steamer it currently uses to shape guitar sides. the steamer has 6 years of remaining life. if kept, the steamer will have depreciaiton expenses of $650 for five years and $325 for the sixthyear. its current book value is $3,575, and it can be sold on an internet auction site for$4,150 at this time. if the old steamer is not replaced, it can be sold for $800 at the endof its useful life. gilbert is considering purchasing the side steamer 3000, a higher-end steamer, whichcosts $12,000 and has an estimated useful life of 6 years with an estimated salvage value of$1,500. this steamer falls into the macrs 5-year class, so the applicable depreciationrates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. the new steamer is fasterand allows for an output expansion, so sales would rise by $2,000 per year; the newmachine's much greater efficiency would reduce operating expenses by $1,900 per year. to support the greater sales, the new machine would require that inventories increase by$2,900, but accounts payable would simultaneously increase by $700. gilbert's marginalfederal-plus-state tax rate is 40%, and its wacc is 15%.a. should it replace the old steamer? b. npv of replace = $2,083.51