1. A loan of $100,000 is taken out which requires an annual interest payment of 6% of the borrowed amount of money (in market dollars). No principal payments are made, only interest is paid. Inflation is 3.1% per year. What will be the value of interest payment at the end of fifth year in real dollars?
$6,000
$5,150.
$6,989
$5,930.
2. If you own 270 shares of Air Line Inc at $18.85, 160 shares of BuyRite at $9.8, and 360 shares of Motor City at $45.85, what are the portfolio weights of each stock?
Air Line = .3418, BuyRite = .2025, MotorCity = .4557
Air Line = .2197, BuyRite = .0677, MotorCity = .7126
Air Line = .2700, BuyRite = .1600, MotorCity = .3600
Air Line = .3333, BuyRite = .3333, MotorCity = .3333