1. Assume inflation is 0.2% per month. Would you rather earn a nominal return of 0.75% per month, or a real return of 6.5% APR, compounded annually? (Answer: Nominal 0.75% per month)
2. Suppose your portfolio consists of Stock A and Stock B. Stock A has an expected return of 15.3% and Stock B has an expected return of 4.1%. If your goal is to create a portfolio with an expected return of 9.2%, what is your weight in Stock A??
3. Explain how by using just a bank account that earns interest at a rate of 6% p.a. compounding monthly, you can generate a perpetuity of $119 every two months. How much money do you need?