# HW2 - Econ 4751 HW 2 Due on Thursday Learning about Return...

This preview shows pages 1–4. Sign up to view the full content.

Econ 4751 HW 2 Due on Thursday 10/15/2009 Learning about Return and Risk from the Historical Record 1 . (15 ’) A) Over the past year you earned a nominal rate of interest of 10 percent on your money. The inflation rate was 5 percent over the same period. What’s the exact actual growth rate of your purchasing power? B) If the annual real rate of interest is 2.5% and the expected inflation rate is 3.7%, the nominal rate of interest would be? C) Derive a condition/relation on nominal interest rate and inflation rate, such that real interest rate is positive.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2. (10 ’) A) An investment provides a 1.25% return quarterly, its effective annual rate is? B) Describe the steps you use to calculate the approximate EAR when APR is compounded very frequently. Write down mathematical equations/theorems needed.
(15’) You have been given this probability distribution for the holding period return for KMP stock: A)What is the expected holding period return for KMP stock? B)

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 8

HW2 - Econ 4751 HW 2 Due on Thursday Learning about Return...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online