1. (10 pts) You have the opportunity to purchase NFL Franchise A. The probability distribution of expected returns for the franchise is as follows: Probability Rate of Return 0.1 -20% 0.2 0.4 0.2 0.1 What is the expected rate of return for your investment in Franchise A? What is the standard deviation? 2. (6 pts) What is the nominal interest rate (k) of a 5-year U.S. Treasury bond with a real risk-free rate of interest of 1% and inflation expected to be at 3.5% per year? Assume that the maturity risk premium is zero. 3. (6 pts) For a given bond, you have the following information: Real risk-free rate (k)=3%, inflation premium = 8%, default risk premium = 2%, liquidity premium = 2%, and maturity risk premium = 1%. What is the nominal risk-free rate (KE)? 4. (8 pts) What is the real increase in value if $1,500 is invested for one year at 5% interest and the rate of inflation during that time is 1.79%? 5. (10 pts) Suppose you were selling additional land that the business had to potential real estate investors. Company A will give you $150,000 for the land now and Company B will give you $240,000 five years from now. If the annual interest rate is 11%, which deal should you take? (Hint: What will Company A's payment be worth in five years?) 6. (6 pts) A sport organization has a commitment from a sponsor for a $17,000 payment in three years. What is the present value of that money if it is discounted at (a) 3%, (b) 5%, and (c) 9%? 7. (8 pts) What is the future value of $12,000 invested at 8% interest, compounded yearly for ten years? 8. (8 pts) John decides to save some money. He deposits $500 at the end of each year. With an annual interest rate of 10%, what is the future value of his entire savings at the end of the 10th year? (Hint: Use online calculator for an annuity problem)