Stock Options (a) Explain what a put option is. (b) Suppose that two years ago you had paid $5 for a put option with a strike price of$20, with an…
September 3, 2020
Suppose that the T-account for Scotiabank is as follows: Assets: Reserves: $8,100 Loans: $72,900 Liabilities: Deposits:
September 3, 2020

Hello can someone help me answer this question? It is for the course pricing. Thank you

Q1. A group of 12 consumers are considering whether to connect to a new social network.Consumer 1 has an intrinsic value of $1 for hooking up to the network, consumer 2 has an intrinsic value of $2, consumer 3 has an intrinsic value of $3, and so on up to consumer 12.Each consumer’s willingness-to—pay (WTP) to connect to the network depends on the totalnumber of persons who are connected to it. The exact relationship is described as follows:for each 1, consumer i’s willingness-to-pay to connect to the network is itimes the totalnumber of persons connected. Thus if 5 people are connected to the network, consumer 1’swillingness-to—pay is $5, consumer 2’s willingness-to—pay is $10 and so on. a. (3 points) Assume that for any given number of people in the social network, consumerwith the highest willingness-to—pay will sign up first. Use a table to show the relationshipamong the total number of people in the network, the marginal consumer who joins thenetwork, and the willingness-to—pay for the marginal consumer. The table should havethree columns: (i) Total no. of consumers in the network, (ii) The intrinsic value of themarginal consumer, (iii) Willingness-to—pay of the marginal consumer. b. (5 points) Suppose the network has decided to subsidize consumers 1 and 2 (i.e., theconsumer with intrinsic value = 1, and consumer with intrinsic value = 2) to join thenetwork for free, and then set the price at $35. Assume that a consumer will not sign upfor the network unless his/her willingness-to—pay will be higher than the price he/shepays, as soon as he/she signs up. What will be the total number of consumers who willsign up the network? [Hint Create a table similar to part (a) and use it to help you answer the question] c. (5 points) Suppose the network has decided to subsidize consumers 11 and 12 (i.e., theconsumer with intrinsic value = 11, and consumer with intrinsic value = 12) to join thenetwork for free, and then set the price at $35. Assume that a consumer will not sign upfor the network unless his/her willingness-to—pay will be higher than the price he/shepays, as soon as he/she signs up. What will be the total number of consumers who willsign up the network? [Hint Create a table similar to part (a) and use it to help you answer the question] (1. (5 points) Suppose the network has decided to subsidize consumers 5 and 6 (i.e., theconsumer with intrinsic value = 5, and consumer with intrinsic value = 6) to join thenetwork for free, and then set the price at $35. Assume that a consumer will not sign upfor the network unless his/her willingness-to—pay will be higher than the price he/shepays, as soon as he/she signs up. What will be the total number of consumers who willsign up the network?

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