Question no 1: Problem Set 3 Foundations of Finance Due Date: 12 March. 2019 Suppose you...

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Question no 1: Problem Set 3 Foundations of Finance Due Date: 12 March. 2019 Suppose you have 2 financial assets (A and B respectively) whose annual returns are shown in the following table. Assume you invest $100,000 in each, and the proceeds from year 1 are reinvested in year 2 and so on. (a) How much money do you accumulate in each of them after 5 years? Explain. (b) For each fund, calculate the single annual rate which would yield the same return over the 5-year period. (c) What is the expected return for next year (calculate for both Asset A and Asset B)? Year Asset A Asset B 1 10% 6% 2 2% 7% 3 -5% -5% 4 10% 3% 5 12% 6% Question no 1: Problem Set 3 Foundations of Finance Due Date: 12 March. 2019 Suppose you have 2 financial assets (A and B respectively) whose annual returns are shown in the following table. Assume you invest $100,000 in each, and the proceeds from year 1 are reinvested in year 2 and so on. (a) How much money do you accumulate in each of them after 5 years? Explain. (b) For each fund, calculate the single annual rate which would yield the same return over the 5-year period. (c) What is the expected return for next year (calculate for both Asset A and Asset B)? Year Asset A Asset B 1 10% 6% 2 2% 7% 3 -5% -5% 4 10% 3% 5 12% 6%