1

Samet plans to invest his savings in a fixed income fund. He manages to deposit $500 at the end of the first year, $700 at the end of the second year, $400 at the end of the third year, and $800 at the end of the fourth year. If the fund earns (EAR) 5% interest each year, what is the future value of these deposits at the end of the fourth year?

2

Suppose the real risk-free rate is 4%, inflation is expected to be 2% next year, 2.5% the following year, and 3% the third year. The maturity risk premium is estimated to be 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the number of years to maturity, hence the pure expectations theory is NOT valid. What rate of return would you expect on a 3-year Treasury security?

	a.	6.80%
	b.	4.30%
	c.	7.22%
	d.	7.92%
	e.	6.50%

o a. $2,570.56 Ob b. $2,114.81 Oc $2,440.00 d. $2,448.16 $2,331.58 O e