1)

Given these market scenarios, what is the expected return of the market?

16%

5.8%

20%

1.3%

None of the above.

2) U.S. government notes mature in 5 years, have a par value of $1,000, and have an annual coupon rate of 3.5% (paid on a semi-annual basis). The current market interest rate for comparable bonds is 2.55% (annual). Approximately, what is the bond price (report answer as a positive number)?

$919.23

$897.79

$1,011.60

$1,044.33

None of the above.

Economic Scenario Booming Good Slow Growth No Growth Negative Growth Recession Depression Probability Stock Market Return 5% 35% 10% 20% 20% 5% 30% 1% 20% -5% 10% -15% 5% -25%