1. Your current salary is $100,000 (S) per year. If you invest 10 percent (b) of each year's salary in a retirement plan at a guaranteed return (i) of 10 percent per year, how much would you have at the end of 30 years, if: A. Your salary is unchanged for the next 30 years? B. Your salary grows (g) at 4, percent per year?

1. You earn 10%(R1) in year 1.-5%(R2) in year 2 and 25% (R3) in year3

a) What is your arithmetic average return?

b) What is your geometric average return?

c) What is your IRR if you invested $100 at the beginning year 1, $200 at the beginning of year 2 and $300 at the beginning of year 3?

1. You want to borrow $100 for one year. Bank A charges 6% compounded weekly Bank B charges 5.9% compounded daily. Both rates are APR. Which bank would you prefer to borrow from

1. You are the manager for a $100 million portfolio, which may be invested in any combination of bonds and stocks.

The following table provides estimates of risk and return for bonds and stocks:

	Bonds (#1)	Stocks(#2)
Expected Return	15%	25%
Standard Deviation	15%	25%

Correlation between Bonds and Stocks = 0

1. What are the minimum Risk Portfolio Weights
2. What is the expected return and standard deviation of the minimum risk portfolio constructed with #1 and #2.

5. Should anybody invest in the following portfolios (Yes or No)

Portfolio #	Fraction in Bonds (#1)	Fraction in Stocks (#2)
1	1.0	0.0
2	0.75	0.25
3 4 5	0.5 0.25 0.0	0.5 0.75 1.0