S1 - H AAS S CHOOL OF B USINESS U NIVERSITY OF C ALIFORNIA...

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Unformatted text preview: H AAS S CHOOL OF B USINESS U NIVERSITY OF C ALIFORNIA AT BERKELEY UGBA 103 A VINASH V ERMA S OLUTION TO H OMEWORK 1 + G RADING P OLICY F OR EACH PART , THE CREDIT DEPENDS MAINLY ON DEMONSTRATION OF CONCEPTUAL UNDERSTANDING . T HEREFORE IF A PARTICULAR PART OF THE QUESTION HAS BEEN CORRECTLY SET UP , YOU WILL GET ENTIRE CREDIT FOR THAT PART EXCEPT ONE POINT . O NE POINT IS RESERVED FOR GETTING THE RIGHT NUMERICAL ANSWER . Y OU WILL NOT BE PENALIZED FOR YOUR ERRORS TWICE . T HUS , IF YOU MADE AN ERROR IN PART ( i ), AND USED THAT ERRONEOUS ANSWER AS AN INPUT TO PART ( ii ), YOU WILL NOT BE PENALIZED AGAIN SO LONG AS PART ( ii ) WAS SET UP AND ANSWERED CORRECTLY OTHERWISE . 1. Ms. Juanita Fotheringay-Murgatroyd has $450,000 available to invest. The three-year spot interest rate, or, more precisely, the rate of interest available now in the market for risk free investments with a term to maturity of three years, is 14.4% per year. A similarly defined five-year spot interest rate is 5.85% per year.years, is 14....
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