1. Suppose you received $1,000 and you wish to find its value in 10 years. Calculate the value of this gift if the interest rate was 8% per year, 10% per year, and 12% per year. What can be said about interest rates in this problem?
A - As rates increase, present value decreases at a decreasing rate.
B - As rates increase, present value decreases at an increasing rate.
C - As rates increase, future value increases at a decreasing rate.
D - As rates increase, future value increases at an increasing rate.
2. The capital assets pricing model (CAPM) tells us that in an efficient and fair capital market, the expected return on an asset only depends on its:
a. Total risk. b. Systematic risk. c. Unsystematic risk. d. No risk.