Suppose a firm has 100 machines and 100 shares outstanding. The price per share is 2, and the purchase price of a machine is 1. So Tobin's q is equal to
A) 2.
B) 1.
C) 0.5.
D) 1.5.
Question 2
Let: (1 ) Pt be the price of one unit of a market basket of goods (i.e., a composite commodity) in year t; (2 ) Pet+1 be the expected price of one unit of a market basket of goods in year t + 1; (3 ) et+1 be the expected rate of inflation between period t and t + 1; and (4 ) it be the one-year nominal interest rate. Suppose an individual borrows the equivalent of one unit of a composite commodity today. Given this information, which of the following expressions represents (i.e., is equal to) the amount of the composite commodity one must repay in one year?
A) (1 + it)(Pet+1)/(Pt)
B) (1 + et+1)/(1 + it)
C) (1 + et+1)/(1 + it) - 1
D) (1 + it)(Pt)/(Pet+1) - 1
E) none of the above
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