1. An investor expects to receive 5 $ of dividend income from an equity investment and will probably sell that equity after 1 year at a price of 40 $. The expected rate of return for this investor is 25%. What should be the price that the investor would pay for the equity right now?

a) 28

b) 36

c) 45

d) 56

e) other

2. Suppose that you have a risky asset that provides you with an expected return of 12% per year with 20% volatility (standard deviation). Consider a risk-free asset that provides you with a 3% risk-free return. What would be the maximum possible expected return on your portfolio?

a) 18%

b) 15%

c) 14%

d) 12%

e) other