A museum of natural history opened a gift shop that operates throughout the year. Top-selling product is a bird feeder. Annual demand for the bird feeder is 933 units. Cost per order is $55. Annual holding cost per unit is $19. Assuming that the shop uses the EOQ as the order size, what would be the total holding cost for the bird feeder

$1396.5

Explanation:

EOQ or economic order quantity formula is given as:

Where, D = demand per year

C_0 = ordering cost and H_c = holding cost per unit per year

EOQ= 73.5 units

Since, the order size is EOQ then, total holding cost

= holding cost per unit per year × EOQ

=73.5×19

=$1396.5

The price of a one-year European put option on the stock with a strike price of $50 is $2.09

Explanation:

As, the call and the put option is of the same asset class, we apply call-put parity to find the price of the European put option.

The call-put parity function is:

C + PV(x) = P + S; in which:

C: Price of the call option = $6;

PV(x) : present value of strike price = Strike price in one year / e^6% = 50/e^6% = $47.09

P: price of the put option

S: spot price of the asset = $51

=> P = C + PV(x) - S = 6 + 47.09 - 51 = $2.09.