Measuring Inflation-25 points Using the Atlantis CPI information in Table 2, cal
ID: 1193973 • Letter: M
Question
Measuring Inflation-25 points Using the Atlantis CPI information in Table 2, calculate the inflation rate in each year from 2001 to 2005, only if possible. (Show all work.) Measuring Employment-25 points Bureau of Labor Shenanigans announces, of all adult Atlantians: 175,000,000 were employed, 13,000,000 were unemployed, and 96,000,000 were not n the labor force. Use the above information to calculate: a) The adult population b) The labor force c) The labor-force participation rate d) The unemployment rate e) How would the labor force participation rate and unemployment rate change if 500,000 discouraged-job seekers stopped looking for work? Explain.Explanation / Answer
The payoff from the call option is $17 if the stock price rises and $12 if the stock price falls. From the binomial pricing model we can create a replicating portfolio with the following two equations:
$17 = ($47 × x) + (1.05 × y)
$12 = ($42 × x) + (1.05 × y)
x = 1 share of stock
y = –28.57 of risk free bonds
The value of the option is the value of the replicating portfolio:
(1 × $45) + (–28.57) = $16.43