1. (a) Discuss the overall purpose people have for investing. Define investment.

(b) As a student, are you saving or borrowing? Why?

(c) Divide a person's life from ages 20 to 70 into 10-year segments and discuss the likely saving or borrowing patterns during each period.

(d) Discuss why you would expect the saving-borrowing pattern to differ by occupation (for example, for a doctor versus a plumber).

(e) The Wall Street Journal reported that the yield on common stocks is about 2 percent, whereas a study at the University of Chicago contends that the annual rate of return on common stocks since 1926 has averaged about 10 percent. Reconcile these statements.

(f) Some financial theorists consider the variance of the distribution of expected rates of return to be a good measure of uncertainty. Discuss the reasoning behind this measure of risk and its purpose.

(g) Discuss the three components of an investor's required rate of return on an investment.