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Macroeconomic Notes for March 7th, 9th, and 11th for Professor Kaplan's Macroeconomics

by: Robin Silk

Macroeconomic Notes for March 7th, 9th, and 11th for Professor Kaplan's Macroeconomics Econ 2020

Marketplace > University of Colorado at Boulder > Economcs > Econ 2020 > Macroeconomic Notes for March 7th 9th and 11th for Professor Kaplan s Macroeconomics
Robin Silk

GPA 3.871

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About this Document

A weeks worth of notes for Kaplan's Macroeconomics.
Principles of Macroeconomics
Jay Kaplan
Class Notes
Macro, Econ, macroecon, Macroeconomics, CU, Buffs, Kaplan, March, 9th, options, Derivatives, call option, put option
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This 2 page Class Notes was uploaded by Robin Silk on Monday March 14, 2016. The Class Notes belongs to Econ 2020 at University of Colorado at Boulder taught by Jay Kaplan in Spring 2016. Since its upload, it has received 41 views. For similar materials see Principles of Macroeconomics in Economcs at University of Colorado at Boulder.


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Date Created: 03/14/16
March 7th    1. Current Events  a. 1950­2005 Growth Measure (Avg Per Year)  i.                                                    S.O  ii. Earnings per Share 10.75% 7.75%  iii. Sector Growth 12.06% ­12.3%  iv. Avg. Dividend Yield 2.13% 5.08%  v. Total Return 13.09% 14.46%  b. If you invested $1000 in both in 1950, in 2005 it would be worth $876,000 for IBM  and $1,682,000 for Standard Oil  i. Application  1. Save and reinvest dividends  2. Look for yield and low beta  3. No need to chase growth      2. Options  a. Derivative: derive value from an underlying asset  b. Calls & Puts   i. Call Option: Gives buyers the right to purchase stock at a fixed price  ii. Put Option: The right to sell stock at a fixed price  iii. 1 Option Contract: 100 shares  iv. Two­party contracts: buyer and seller  v. The value of options contracts move with stock share prices      March 9th    1. Derivatives (continued)  a. derive value from an underlying asset  i. Call and Put Option (two party contract)  1. Calls: buy low, sell high  2. These contracts are worth 100 shares  3. Options can be activated until market closes on the expiration date  a. Strike Price: $55  b. Option Cost: $3  b. Scenarios  i. Price: $51 ­ Let the contract expire to minimize loss  ii. Price: $57 ­ Minimize losses; only lose $100 as opposed to $300 from  expiration  iii. Price: $70 ­ Make a profit; $1200  iv. Zero Out ­ Buying and Selling an option when it is at the same strike price  but with different option costs  1. Call option prices have a positive correlation to the market price of  the underlying asset     c. Put Option  i. Sell high, buy low  1. Market price: $52.50  2. Strike Price: $50  3. Option Price: $4.20    March 11th      1. Jan 20th 2017 ­ Continuation from last class  a. Using last class’ strike price etc.  b. MSFT market price $52.50  i. $5000 ­ $5250 ­ $420 = ­$670  c. $48  i. Loss: $5000 ­ $4800 ­ $420 = ­$220  1. 5000= paid in the option  2. 4800=market cost of 100 shares  3. 480= contract cost  d. $40    2. Sell high option strike price > buy low market price   


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