1. Dustin is considering an investment that will pay $4500 a year for 9 years, starting 1 year from today (which is normal). How much should Dustin pay for this investment today if he wishes to earn a 8 percent annual rate of return?
2. Dollar, Inc. wants to offer preferred stock for sale at a price of $15 a share. The company wants its investors to earn an 9.5 percent rate of return. What is the minimum annual dividend the firm will need to pay per share?
3. Consider an investment consisting of 2,000,000 dollars investment in index A and 1,800,000 investment in index B. Assume that daily volatility of each asset is 2% and correlation of returns is 0.6. Calculate 1 day and 10 days Value-At-Risk with 95 percent confidence.